Dr. Gyan Prakash
Neha Misra (2011-MBA-013)
Public Private Partnership
Public Private Partnership (PPP) is a contract between a public sector institution/municipality and a private party, in which the private party assumes substantial financial, technical and operational risk in the design, financing, building and operation of a project. Traditionally, private sector participation has been limited to separate planning, design or construction contracts on a fee for service basis – based on the public agency‟s specifications. Expanding the private sector role allows the public agencies to tap private sector technical, management and financial resources in new ways to achieve certain public agency objectives such as greater cost and schedule certainty, supplementing in-house staff, innovative technology applications, specialized expertise or access to private capital. The private partner can expand its business opportunities in return for assuming the new or expanded responsibilities and risks. PPPs provide benefits by allocating the responsibilities to the party – either public or private – that is best positioned to control the activity that will produce the desired result. With PPPs, this is accomplished by specifying the roles, risks and rewards contractually, so as to provide incentives for maximum performance and the flexibility necessary to achieve the desired results “PPP is a partnership between the public and private sectors with clear agreement on shared objectives for the delivery of public infrastructure and/or public services.” There is no single PPP engagement model that can satisfy all conditions concerning a project‟s location setting and its technical and financial features. The most suitable model should be selected taking into account the country‟s political, legal and socio-cultural circumstances, and maturity of the country‟s PPP market and the financial and technical features of the projects and sectors concerned.” This has led to innovation in the engagement models.
Roadmap To Successful Implementation of PPP Projects
Indian Experience Of PPP
The fast-growing economy and modernization of India has required the use of PPPs to finance and develop much of the nation‟s plan to develop 13,000 kilometres of roadway. With increasing network of roadways, rapid growth in number of automobiles reliance on PPP for efficiency and for sharing of responsibilities is inevitable. Those sectors which cannot be commercialised (rural roads, district roads) are handled by public sector and its operations and those which can be (e.g. national highways, state highways) are handled through PPP Model. A large share of the transport projects in India, to expand the national highway system, has been executed through public-private partnerships. Most of these are real-toll contracts, combining a long-term concession for an existing stretch of highway with a requirement to expand capacity to four lanes or more and, in some cases, a government subsidy. Activity has also been on the rise outside of roads. In 2006 the Indian government floated tenders to concession the Delhi and Mumbai airports, and it is now developing a private investment program in the rail sector. There is private participation in power distribution as well. In India power distribution has been privatized in Delhi and the state of Orissa, and some states, such as Maharashtra, are developing “franchise” models akin to lease contracts to bring in the private sector. While there has been less progress in the water sector, some initiatives are going forward. In India the state government of Karnataka, working through a management contractor, is piloting a scheme to improve water supply in the cities of Belgaum, Gulbarga, and HubliDharwar. Some 25,000 households that before were receiving water only every three to seven days now have 24/7 water...