It is not unknown to us that the reason for the government to partner with the private sector, through schemes like the BOT, BOOT, to effectively address the infrastructure gap that exist today, is on account of the fact that the government is unable to fully finance/execute the project on its own and that the private sector does not find a viable market for the project[1]. This forces the government to form the joint venture and facilitate and create the market for the project, using the tax payers’ money, allowing the private sector to enter. However the question is; is the whole affair fair?
What “fair” am I talking about? Well, I talk of the “fare” that is quite often collected by means of the toll to recover the cost of construction and the profits for the private sector. What about it? Well, don’t you see the delicacy of the situation here; by means of the toll, the private sector is inevitably allowing those users who pay, alone, to use the facility till the facility is transferred back to the government, thereby effectively pushing away a section of “would be users” had there been no toll. On the other hand the government in effect subsidizes the toll paid by the users of the facility with the tax payer’s rupee. So isn’t this a strong enough argument to give a boot to the toll system? Shouldn’t the government think more seriously about paying up through annuity payments? Of course we will have to live with higher taxes but we can rest assured that anyone and everyone can use the facilities.
None the less, the relative efficiency of the tax versus toll collection, in recovering the costs involved, needs to be investigated. For all you know such proposals may receive a quick and “corrupt” approval. All I want to tell is that, annuity is the right road; but don’t forget your seat belt and helmet.
On the lines of efficiency, there is yet another issue; what will the government do with the assets once they are transferred back after the concession period? The answer that came up in class was in the lines that the government may choose to run the facility or come into an agreement with a private firm for operation and maintenance. Don’t you think there is an inherent inefficiency in the process? The firm that was running the facility during the concession period would by all means be better acquainted and equipped for maintenance; however they may not be involved after the transfer. But come to think of it, permanent ownership of infrastructure assets by private firms, which is by far an existent solution, has its own set of disadvantages as discussed in class.
In this context the BOAT, Build Operate Associate and Transfer approach perpetuated by firms like the Venture Street[2] offers a glimmer of hope. The idea is that an agreement may be formed between the private and public sector and the project may be build; following this the private sectors operates the facility, does the necessary recruitments and equipment purchases; after which the private firm forms a long term association with the government and perhaps incorporate certain key government officials in the process and at the end of it transfer the asset along with the people, equipment and other supporting facilities to the government, which later will/may function as part of the concerned government infrastructure management body. Though the BOAT was build for a different purpose and the government was never in the BOAT, there is no reason why the government can’t choose to get on board and save itself from drowning.
Reference
[1] Chapter 11: Build-Operate-Transfer for Infrastructure, Development: Lessons from the Philippine Experience ,Gilberto M. Llanto
[2] http://www.theventurestreet.com/
[3] http://en.wikipedia.org/wiki/Build-Operate-Transfer
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