After an analytic study of the under implementation Rs 4 billion Public Sector Development Programme (PSDP), the Planning Commission has sought either their privatization or their execution through public-private partnership.
An analytical review of the PSDP portfolio says that with the population increasing at 2 percent annually, there is tremendous stress on the resources.
The government does not have the fiscal space for spending on public services given its immense obligations to provide defense, law and order and servicing the outstanding public debt. In order to move the growth agenda forward, many projects must be privatised or implemented through public private partnership (PPP) mode.
Planning Commission Deputy Chairman Dr Nadeemul Haque, in the review, noted that for decades PSDP was looked for the provision of key infrastructure to stimulate private investment for achieving the objectives of sustainable economic growth. The PSDP has delivered some key infrastructure such as dams, power stations, roads, universities. Yet sustainable growth could not be achieved.
“With this in mind we are beginning to take a long hard look at the PSDP with view to understanding what return on the investment the taxpayer is making”, he said, adding that the PSDP delivery suffers from difficulties like inadequacies of fiscal policy and weak planning process.
The report analyses the current portfolio of investments in PSDP of Rs 4.1 trillion with a view to identify issues hindering its effective implementation. The emphasis is on its rationalisation in the light of its increasing throw-forward of over Rs 3 trillion of approved projects in backdrop of fiscal constraints.
The most critical issues are the consequence of 18th Amendment and 7th NFC Award on the PSDP. Another issue is as to how to address Rs 3 trillion throw-forward and can the PSDP finance mega infrastructure projects, like Bhasha Diamer Dam?
“The backlog of approved projects has been increasing. Approving forums continue to approve projects with out considering fiscal implications. Project cash flows and benefits are vague and if discounted at higher risk adjusted rate at 35 percent instead of 12 percent then most PSDP projects become unviable”, the review says.
The analysis calls for reviewing and rationalizing the PSDP portfolio so that limited fiscal resources are leveraged towards viable projects of energy, water, transport and other infrastructure sector, being the primary responsibility of the federal government. The projects which have positive impact on the economy and society and offer the greatest rates of returns should be financed with priority.
The commission’s recommendations include limiting the number of approved projects and their reprioritising. It seeks that the provincial projects should not be financed by the federal PSDP and to reduce the throw-forward liability, potential projects like Diamer Bhasha Dam may be transferred to private sector with public-private partnership through various modes.
