Former Governor of RBI Sri YV Reddy and I

Former RBI Governor : "PPP in the infrastructure area is private profit at the cost of public expenses"

[News Reports]

Date: Sat, 18 Dec 2010

In a one to one discussion almost 6 years ago when he was in Reserve bank, I argued the same thing and he agreed with me. Same thing about derivatives, and when Government allowed PSUs to also to indulge in interest rate swaps, I was unhappy and he too cautioned me. But dynamism in finance officers to realise the initial cash flow benefits to present a better balance sheet was difficult to rein in. With all precautions, after 4 years of such swaps, we found the going tough, but on longterm it all evened out and I sighed with relief.

Reddy is one single person in the Government, who can be credited to have kept our finance system from a bankruptcy, even when he was goaded to become more relaxed and allow the unbridled derivative market to flourish.

The current PPP projects actually are means to inflate capital costs and benefit to a large extent the private parties with public funding. But the argument is that we get a nice shiny metros etc but the hidden costs are like the scam of telecom; some make undue profits. The telecom revolution in India brought cell phone to every vegetable vendor and auto-ricksha driver and villagers are well connected. So what if Raja or Radia or Tata made some extra bucks?

Similarly the contractors in roadways, power sector and metro construction, within 3 to 5 years rose from turn overs of Rs 10 to 50 cr levels to the Rs 2000 cr and Rs 5000 cr turnover. It is a matter verifiable record.

Wealth and confidence of these individuals is some thing to be seen. They have become so powerful that now a days they just tick off the very officers who made them so rich, with immense arrogance. They offer employment to these officers and throw crumbs, while for their Project Heads, they recruit either an Australian or Malaysian!!!

But why not? Some even shifted from real estate in to advanced telecom 2G license auction and sell off the same at huge profits.

PPP is not bad if you do not worry about the minor irritant of public money getting laundered back to political bosses and the facilitators of the process.

Reddy belongs to old guard and I recollect fondly the time I used to spend with him in Reserve Bank, when I was in Mumbai.

Well time passes and greed now rules. Then rules follow greed!

B Rajaram

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