{"id":56346,"date":"2020-03-02T11:00:48","date_gmt":"2020-03-02T05:30:48","guid":{"rendered":"https:\/\/blogadmin.forumias.com\/?page_id=56346"},"modified":"2020-03-02T11:00:50","modified_gmt":"2020-03-02T05:30:50","slug":"answered-what-is-public-private-partnership-ppp-discuss-various-advantages-and-issues-related-to-public-private-partnership-ppp-in-india","status":"publish","type":"page","link":"https:\/\/forumias.com\/blog\/answered-what-is-public-private-partnership-ppp-discuss-various-advantages-and-issues-related-to-public-private-partnership-ppp-in-india\/","title":{"rendered":"[Answered] What is public-private partnership (PPP)? Discuss various advantages and issues related to public-private partnership (PPP) in India."},"content":{"rendered":"\n
\n Demand of the question<\/strong>\n Introduction.\n <\/strong>What is public-private partnership (PPP)?\n Body.\n <\/strong>Discuss various advantages and issues related to\n public-private partnership (PPP) in India.\n Conclusion.\n <\/strong>Way forward.\n <\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

According to World Bank, public-private\npartnership (PPP) is a long-term contract between a private party and a\ngovernment entity, for providing a public asset or service, in which the\nprivate party bears significant risk and management responsibility, and\nremuneration is linked to performance. \nPublic-private partnerships typically are long-term and involve large\ncorporations on the private side. Some of the commonly adopted forms of PPPs\ninclude build-operate-transfer (BOT), build-lease-transfer (BLT),\ndesign-build-operate-transfer (DBFO), operate-maintain-transfer (OMT), etc. A\nkey element of these contracts is that the private party takes on a significant\nportion of the risk.<\/p>\n\n\n\n

Various\nadvantages of public-private partnership (PPP):<\/strong><\/p>\n\n\n\n

  1. Access to private sector finance: <\/strong>India has a very large infrastructure need and\nan associated funding gap. PPPs can help both to meet the need and to fill the\nfunding gap. PPP projects often involve the private sector arranging and\nproviding finance. This frees the public sector from the need to meet financing\nrequirements from its own revenues (taxes) or through borrowing. <\/li>
  2. Better infrastructure: <\/strong>They provide better infrastructure\nsolutions than an initiative that is wholly public or wholly private. By\nshifting the responsibility for finance away from the public sector PPPs can\nenable more investment in infrastructure and increased access to infrastructure\nservices.<\/li>
  3. Increased transparency in the use of funds: <\/strong>A well-designed PPP process can bring\nprocurement out from behind closed doors. The PPP tender and award process\nbased on open competitive bidding following international best practice\nprocedures lead to transparency.<\/li>
  4. Less delays: <\/strong>They result in faster project completion and reduced delays\non infrastructure projects by including time-to-completion as a measure of\nperformance and therefore of profit.<\/li>
  5. Risk distribution:<\/strong> Transfer of risks is the most important advantage of PPP\nprojects. In PPP projects, there is a possibility to transfer most or all of\nthe risks to the private entity. The private entities explore opportunities,\neven though they involve risks.<\/li>
  6. Constant cash flow:<\/strong> The state budget is formed of fixed budgets for each\nministry. Major investments are temporary modifications of the budget of a\nministry, and this problem can be difficult to deal with within the budgetary\nprocess. Avoiding major investments by having a constant cash flow is an\nimportant driver when the state looks at the advantages of PPP.<\/li><\/ol>\n\n\n\n

    Various\nissues related to public-private partnership (PPP) in India:<\/strong><\/p>\n\n\n\n

    1. Uncertainties: <\/strong>PPPs often cover a long-term period of service provision\n(eg. 15-30 years). Any agreement covering such a long period into the future is\nnaturally subject to uncertainty. If the requirements of the public sponsor or\nthe conditions facing the private sector change during the lifetime of the PPP,\nthe contract may need to be modified to reflect the changes. This can entail\nlarge costs to the public sector.<\/li>
    2. Policy and regulatory gaps:<\/strong> Inadequate regulatory framework and\ninefficiency in the approval process have been considered as serious\ndisincentives for developers and contractors. For example, more than two years\nwere needed for the Gujarat Pipavav port project to receive the necessary\nclearances after achieving financial closure. Moreover, most of the large\nprojects involve dealings with various ministries where coordination remains inefficient.<\/li>
    3. Crony capitalism: <\/strong>In many sectors, PPP projects have turned into conduits of\ncrony capitalism. It is worth noting that a large chunk of politically\nconnected firms in India are in the infrastructure sector, which have used\npolitical connections to win contracts in the past.<\/li>
    4. Renegotiation: <\/strong>While private firms accept stringent terms of PPP contracts\ninitially, they lose no opportunity for renegotiating contracts, in effect\ngarnering a larger share of public resources than originally planned. Rather\nthan being an exceptional clause, renegotiation has become the norm in PPP\nprojects in India.<\/li><\/ol>\n\n\n\n

      Way\nforward: <\/strong><\/p>\n\n\n\n

      1. Checking Viability: <\/strong>PPPs\n should not be used to evade responsibility for service delivery to\n citizens. This model should be adopted only after checking its viability\n for a project, in terms of costs and risks. Further, PPP structures should\n not be adopted for very small projects, since the benefits are not\n commensurate with the costs.<\/li>
      2. Risk allocation and management: <\/strong>Public-Private Partnership PPP contracts should ensure optimal\n risk allocation across all stakeholders by ensuring that it is allocated\n to the entity that is best suited to manage the risk. A generic risk\n monitoring and evaluation framework should be developed covering all\n aspects of a project\u2019s life cycle.<\/li>
      3. Strengthening governance: <\/strong>The Prevention of Corruption Act, 1988 should be amended to\n distinguish between genuine errors in decision making and acts of\n corruption by public servants.<\/li>
      4. Strengthening institutional capacity: <\/strong>A national-level institution should be set up to support\n institutional capacity building activities and encouraging private\n investments with regard to PPPs. Independent regulators must be set up in\n sectors that are going for PPPs. An Infrastructure PPP Adjudication\n Tribunal should also be constituted. A quick, efficient, and enforceable\n dispute resolution mechanism must be developed for PPP projects.<\/li>
      5. Strengthening contracts:<\/strong> The private sector must be protected against such loss of bargaining\n power. This could be ensured by amending the terms of the Public-Private\n Partnership PPP contracts to allow for renegotiations.<\/li><\/ol>\n\n\n\n

        The success of\nPublic-Private Partnership to a large extent depends on optimal risk allocation\namong stakeholders, the environment of trust and robust institutional capacity\nto timely implementation of PPP projects. To foster the successful\nimplementation of a PPP project, a robust PPP enabling ecosystem and sound\nregulatory framework is essential.<\/p>\n","protected":false},"excerpt":{"rendered":"

        Demand of the question Introduction. What is public-private partnership (PPP)? Body. Discuss various advantages and issues related to public-private partnership (PPP) in India. Conclusion. Way forward. According to World Bank, public-private partnership (PPP) is a long-term contract between a private party and a government entity, for providing a public asset or service, in which the… Continue reading [Answered] What is public-private partnership (PPP)? Discuss various advantages and issues related to public-private partnership (PPP) in India.<\/span><\/a><\/p>\n","protected":false},"author":61,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-56346","page","type-page","status-publish","hentry","entry"],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/56346","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/61"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=56346"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/pages\/56346\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=56346"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}