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Public-Private Partnerships

  1. PPP/3P V.MOHANRAJ, I Ph.D. Scholar, TNAU
  2. Public-Private Partnerships • Public-private partnerships involve collaboration between a government agency & private-sector companies that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers. • PPP is a mode of providing public infrastructure & services by Government in partnership with private sector. It is a long term arrangement between Government and private sector entity for provision of public utilities and services.
  3. Public-private partnership arrangements have existed throughout history, popular -1980s as Govts attempt to obtain some benefits from the Pvt sector without having to make the full privatization jump. According to, the United Kingdom was the first nation in the world to develop the concept of public-private partnership arrangements for public service projects.
  4. According to the World Bank Group, Public-private partnerships do not usually include turnkey construction or service contracts – these are classed as public procurement projects or privatization of utilities where the public sector still has a limited ongoing role. The PPP Knowledge Lab says the following regarding PPPs: “A 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 private party bears significant risk and management responsibility, and remuneration is linked to performance.”
  5. Public-Private Partnership Examples • Transport infrastructure such as highways, airports, railroads, bridges, and tunnels. • Municipal and environmental infrastructure include water and wastewater facilities. • Public service accommodations include school buildings, prisons, student dormitories, and entertainment or sports facilities.
  6. PPP mechanism in India • PPP -major element of India’s infrastructure creation efforts as - huge level of investment requirement in the sector. • 12FYP targets to spend $1000 bn to expand infrastructure. Conventional form of finance – the budgetary allocation by government is not enough to meet this big investment size. • Several efforts to modify and energize the PPP mode of infrastructure generation. • A committee chaired by Kelkar also made valuable recommendations to empower the PPP mechanism. • India’s experience with PPP in a serious manner started from 2006 onwards
  7. Models of PPP (a) Build Operate and Transfer (BOT): Simple and conventional PPP model -private partner responsible to design, build, operate (during the contracted period) and transfer back the facility to the public sector. Role -finance for project, responsibility to construct & maintain it. Public sector -allow it to collect revenue from the users. Ex: NHAI projects.
  8. Build-Own-Operate (BOO): Variant of BOT and the difference is that the ownership of the newly built facility will rest with the private party here. Public sector partner agrees to ‘purchase’ the goods and services produced by the project on mutually agreed terms and conditions.
  9. Build-Own-Operate-Transfer (BOOT): Also on line of BOT. After negotiated period of time, infrastructure asset is transferred to the government or to the private operator. This approach has been used for the development of highways and ports.
  10. Build-Operate-Lease-Transfer (BOLT) • Government gives a concession to a private entity to build a facility (and possibly design it as well), own the facility, lease the facility to the public sector and then at the end of the lease period transfer the ownership of the facility to the government.
  11. Lease-Develop-Operate (LDO) • Government or the public sector entity retains ownership of the newly created infrastructure facility and receives payments in terms of a lease agreement with the private promoter. • This approach -airport facilities.
  12. Rehabilitate-Operate-Transfer (ROT) • Governments/local bodies allow private promoters to rehabilitate, operate a facility during a concession period. • After concession period, project is transferred back to governments/local bodies.
  13. DBFO (Design, Build, Finance and Operate) • In this model, the private party assumes the entire responsibility for the design, construction, finance, and operate the project for the period of concession.
  14. DCFO/OM • The private party assumes the entire responsibility for the design, construct, finance, and operate or operate and maintain the project for the period of concession.
  15. Management contract Here, the private promoter has the responsibility for a full range of investment, operation and maintenance functions. He has the authority to make daily management decisions under a profit-sharing or fixed-fee arrangement.
  16. Service contract • This approach is less focused than the management contract. • In this approach, the private promoter performs a particular operational or maintenance function for a fee over a specified period of time
  17. Advantages of Public-Private Partnerships • Advantages to both parties. • Private-sector technology and innovation, for example, can help provide better public services through improved operational efficiency. • Public sector, for its part, provides incentives for the private sector to deliver projects on time and within budget. • Creating economic diversification makes the country more competitive in facilitating its infrastructure base and boosting associated construction, equipment, support services, and other businesses.
  18. Disadvantages • There are downsides, too. • Physical infrastructure (roads or railways, involves construction risks). If product not delivered on time, exceeds cost estimates, or has technical defects, private partner typically bears burden. • Private partner faces availability risk if it cannot provide the service promised. Not meet safety or other relevant quality stds, for example, when running a prison, hospital, or school.
  19. • Demand risk occurs when there are fewer users than expected for the service or infrastructure, such as toll roads, bridges, or tunnels. If the public partner agreed to pay a minimum fee no matter the demand, that partner bears the risk.
  20. Partnership agreements Partnerships in following areas: Business: • Two or more companies join forces in a joint venture or a consortium to i) Work on a project (e.g. industrial or research project). ii) Join forces to have a stronger position on the market, iii) Comply with specific regulation (e.g. in some emerging countries, foreigners can only invest in the form of partnerships with local entrepreneurs). Mergers & Acquisitions transaction.
  21. Politics (or geopolitics): Usually called an alliance, governments may partner to achieve their national interests, sometimes against allied governments holding contrary interests, as occurred during World War II and the Cold War.
  22. Knowledge: In education, accrediting agencies increasingly evaluate schools, or universities, by the level and quality of their partnerships with local or international peers and a variety of other entities across societal sectors.
  23. Individual • Some partnerships occur at personal levels, such as when two or more individuals agree to domicile together, while other partnerships are not only personal, but private, known only to the involved parties.
  24. Forms of partnership • General partnership: Partnership in which all partners manage the business and are personally liable for its debts. • Limited partnership (LP): liability of limited partners is limited to their investment in the partnership.
  25. More recently, additional forms of partnership have been recognized • Limited liability partnership (LLP): a form of partnership in which all partners may have some degree of limited liability. • Limited liability limited partnership (LLLP): a form of limited partnership in which general partners have limited liability for the debts and obligations of the limited partnership.
  26. • Silent partner or sleeping partner is one who still shares in the profits and losses of the business, but who is not involved in its management. Sometimes the silent partner's interest in the business will not be publicly known.
  27. References: • Van den Ban BW & Hawkins BS. 1998. Agricultural Extension. S.K. Jain Publication. • Debabrata Das Gupta. (2008). Extension Education: Core Concepts And Emerging Areas: Agrobios (India). • Singh, A. K., Lakhan singh, & Roy Burman, R. (2006). Dimensions of Agricultural Extension (Second ed.): Rama Publishing House. • • models-for-public-private-partnership-ppp-in-infrastructure/ • 845098

Notes de l'éditeur

  1. When the government is short of funds for a much-needed project, a public-private partnership, which benefits from an injection of money from the private sector, is a promising option.