By Amy Chang
This July, Indian Prime Minister Modi’s government approved the use of the Swiss Challenge Model (SCM) as part of an effort to increase private sector investment for the renovation of 400 railways across the country. SCM is a form of public procurement in which the government publicizes unsolicited bids for projects and invites third party actors to match or exceed them. Later in October, the SCM was also adopted to develop the Andaman and Nicobar Islands—a cluster of islands due east of India in the Bay of Bengal.
The decision to adopt the SCM comes against the backdrop of a sharp plunge in private sector investment for infrastructure projects in India, and the government hopes it will help cut red tape and increase efficiency by allowing local companies and investors to craft proposals in line with their capabilities and needs. There are, however, serious concerns regarding the level of accountability that the SCM process requires, particularly when dealing with projects where public authorities have limited knowledge and experience.
The World Bank estimates that India needs $1.7 trillion to fund its infrastructure gap by 2020, but current levels of funding are insufficient to cover that cost: Private investment in infrastructure fell from $23.8 billion in 2012 to $3.6 billion last year. Under the SCM, companies present an unsolicited proposal to the government, and then the project is opened to other third-party bidders. The original proposer then has the right to counter-match any final offer. The SCM invites private investors to formulate their own projects, while still encouraging competition through an open bidding process. Continue reading