Towards a framework of ‘Augmented Entrepreneurialism’: Investigating the State’s Divergent Responses to Businesses in Public Private Partnership Projects in the Transport Sector in India

Investigating the State’s Divergent Responses to Businesses in Public Private Partnership Projects in the Transport Sector in India

Abstract

In this paper, I traverse diverse theoretical positions on the entrepreneurial state. The purpose is to explore the nature of embedding of the liberalized state with the private sector across stages of its evolution. I focus on the state’s adoption of Public Private Partnerships (PPP), a mechanism structured as a company with no political representation. Transport infrastructure projects in modernisation of airports and national highways serve as cases.

Contrary to traditional scholarly perspectives of the neo-liberal state which withdraws from its societal accountabilities, in transport sector PPP projects, I observed that public and private parties are legally bound through multiple contracts spanning 20-30 years. The public party contributes land. The private sector finances project implementation through debt and equity contributions, while operating the project, to avail return on investments. The public party regulates the same businesses that it facilitates.

Given unclear institutional boundaries, I examine state-business relationships in three distinct spheres of evolution of the PPP project cycle. At the macro level of policy (1990s), a bold Ministry of Finance initiated several policy reforms to remove entry barriers for domestic and international corporations to invest in public infrastructure projects (Pant and Srivastava, 2015; Kennedy, 2014). Markets evolved (2000-15) through oligopolistic relations between politicians and businesses, which gradually incorporated an array of recurring consultants who occupied the project cycle. A bold, collusive state at the policy level displays risk averseness in project contract implementation stages (2016 onwards), in both sectors. Still driven by delegation and control as opposed to partnership in project construction and operations public and private parties are often entrenched in litigation, project delays and cost escalations. Risk laden outcomes of contractual governance often result in state led loan waivers for insolvent or bankrupt private companies and banks, causing losses to all, public, private parties and the taxpayer. To what extent is this debt ridden, risk-averse state an entrepreneurial one?

In response, this paper re-opens the question of the entrepreneurial state in India. I draw on debates stemming from state spaces and firm theory. At the macro level of policy, debates on business and politics in India (Jaffrelot, et al, 2019) and the theory of state rescaling (Sood and Kennedy, 2023; Kennedy, 2014) provide insights on opaque nexus between political and business elite. At the meso-level of market consolidation, some innovation scholars throw light on how bold entrepreneurial state’s policy interventions are central to evolution of competitive and collaborative markets (Mazzucato, 2020), while others emphasise institutional variety and significance of democratically driven innovation in societal interest (Papaioannou, 2019). At the micro level, the theory of incomplete contracts (Hart, 2003), offers crucial insights on how the production of residual control rights in long term incomplete contracts causes public and private parties to behave in self-interest as opposed to public-interest.

Given the profound risks, to conclude, I propose the need for a wider framework of ‘Augmented Entrepreneurialism’, while urging scholars and practitioners to advocate structural reforms of state-business relations in ways that integrate democratic oversight more systematically.