Changing the face of rural India

The Indian government, through the ministry of rural development, recently launched a scheme to involve private investors in developing urban amenities in rural areas. Known as the Provision of Urban Amenities in Rural Areas (PURA), the scheme aims to develop infrastructure alongside economic regeneration activities in villages through public-private partnership (PPP) agreements.
 
The ministry of rural development (MoRD) recently selected nine private investors for 15 projects spread across villages in nine states in areas such as water and sewage links, solid waste management, construction and maintenance of streets, skill development and economic activities.
 
Private companies shortlisted under the scheme are: Jindal Steel & Power; IL&FS; Infrastructure Kerala; Marg; Buldana Cooperative Society; A2Z Maintenance & Engineering Services; Megha Engineering Infrastructure; Srei Infrastructure Finance and SVEC Constructions, according to a statement from the MoRD.
 
In the first phase of the project, each private investor, in consultation with the MoRD, is required to identify and select a cluster of villages and then partner with the local body to develop facilities. The private investors will also be required to provide “add-on” revenue-earning facilities such as village-linked tourism, an integrated rural hub, a rural market, warehousing and so on.
 
An official from the MoRD who wishes to remain anonymous told Infrastructure Investor that the proposed scheme is the first ever initiative to involve private investors in the country’s rural development programme.  “The scope of the scheme is to select private partners to develop livelihood opportunities, urban amenities and infrastructure facilities to prescribed service levels and to also ensure that the private sector is responsible for its maintenance for the next ten years,” he said.
 
Funding
 
“The leveraging of public funds with private capital and management expertise for creation and maintenance of rural infrastructure is the essence of the PURA scheme,” MoRD said in a statement.
The project has a total cost of INR1.04 billion (€16.8 million; $23.4 million), out of which 46 percent is expected to come from the private sector. Further, a capital grant of 35 percent is expected to come from government sources allocated for PURA and the remainder from the rural development ministry.
 
Reports suggest that, due to lack of funds in the rural development ministry for the 12th five-year plan period (2012-2017), the number of projects may be reduced. A spokesperson from the MoRD said: “We are quite confident that funds for 15 projects will be organised in due course. We are currently in talks with other government departments.”
 
A number of well-known private investors pulled out at the bidding stage for unknown reasons. A source from one of the largest infrastructure companies in India said the scheme is very complicated and the burden for development of infrastructure lies totally with the private sector.
 
“In a scheme where the government is relying on the private sector to develop infrastructure in rural areas for a period of ten years, one can see a number of roadblocks. It is sometimes extremely difficult to make your way through the local bodies in the villages that are often against the idea of private investors coming into their area. But this is surely a scheme which, if it works, will change the face of rural India,” he said.
 
Currently, first-phase projects are proposed to be implemented in nine states across India: Rajasthan; Maharashtra; Kerala; Puducherry; Orissa; Andhra Pradesh; Tamil Nadu; Uttarakhand; and Uttar Pradesh. The government expects that by implementing the initial 15 projects in nine states, the uniqueness of the scheme will be tested and lead to the eventual expansion of the scheme.

Reports suggest that a memorandum of understanding between the private investors, state governments and the MoRD is expected to be signed early next year, after which the pilot projects are expected to take off.
 
However, financing the scheme is still a challenge for the government. Some market sources believe the private sector may be asked to contribute more or the government forced to reduce the number of projects. Further progress is awaited with interest.