P P P – Public Private Partnership

P P P – Public Private Partnership

 

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Govt of India Website on PPP

 

Introduction :

 

·         An innovative way of delivering modern, high quality public services and promoting the country’s competitiveness. 

·         Currently, PPP occupies the page-3 status in the news.

 

What is:

 

·         A long term project between the Government and a private sector company for delivering an infrastructure service on payment of user charges.

·         Partnership / collaboration between a Government and Private firm

·         Used to finance, build & operate public projects

 

Why require:  

 

·         Due to resource crunch, Governments are not able to undertake capital intensive Public projects such as Roads, Bridges, Metro transport, Airports, Sea ports, Power services etc.

·         However Private players might be interested in funding such Public projects subject to receiving the operating profits during the life time of the Project.

·         Significant deficit in the availability of physical infrastructure that impacts economic development.

·         Development of infrastructure requires large investments that cannot be undertaken out of public financing alone, and that in order to attract private capital as well as the techno-managerial efficiencies associated with it, the Government is committed to promoting Public Private Partnerships (PPPs) in infrastructure development.

 

 

Salient features:

 

·         Normally the contract periods of 25 years or longer.

·         Role of Private player:  Designing, Build, Finance, Operating and Transfer –DBFOT

·         Role of Public player: Defining and monitoring the Project as per compliance.

·         Risks are distributed between the Public and Private partners according to the ability of each to assess  

·         The infrastructure projects may not always be financially viable because of long gestation periods and limited financial returns.  Hence, the Govt provides incentives (in India, VGF – Viability Gap Fund ) to the Private player like subsidies, land, tax benefits etc.

·         Typically, a private sector consortium forms a special company called a special purpose vehicle (SPV) to build and maintain the asset. The consortium is usually made up of a building contractor, a maintenance company and a bank lender. It is the SPV that signs the contract with the government and with subcontractors to build the facility and then maintain it.

·         Risk sharing – Private sectors managing commercial risks, construction risks, financial risks.  Whereas Govt managing Political risk and land acquisition.

·         Model Concession Agreement (MCA) - The detailed modalities of the contract between the private player and the Government. This document plays a pivotal role in the implementation of the project. It clearly delineates the risks to be shared by the private player and the government and spells out the formula of sharing of the revenue among other important details

 

Types of PPP

 

BOO	Build, Own & Operate
BOT	Built, Operate & Transfer
BOOT	Build, Own, Operate & Transfer
BOOST	Build, Own, Operate, Share & Transfer
DBFM	Design, Build, Finance & Maintain
DBFMO	Design, Build, Finance, Maintain & Operate
DBFOT	Design, Built, Finance, Operate & Transfer
O & M	Operation & Maintenance
OMDA	Operations, Management & Development Agreement

 

 

Advantages:

 

·         PPP work well when Private sector technology and innovation combine with Government player’s subsidies, tax benefits etc

·         Provide better public services

·         Creating good infrastructure facilities

 

Examples in India:

 

·         PPPAC – Public Private Partnership Appraisal Committee

·         Total PPP projects cost in India  - Rs. 25 Lakhs Crores  (Nearly 2000 Projects)

·         Hyderabad Metro Rail project – Rs. 12000 Crores

·         Teesta Power Project – Rs. 6000 Crores – BOO

·          Dhamra Port, Odisha – Rs. 10000 Crores – BOOST

·         Delhi Internation Airport – Rs. 12000 Crores - OMDA

·          Delhi – Meerut Expressway – Rs. 10000 Crores – DBFOT

·         Container terminal at JNPT – Jawaharlal Nehru Port Trust, Maharashtra– Rs. 6700 Crores -O & M

 

Examples of PPP in Indian Railways:

 

·         In India, Noida Toll Bridge was the first successful example of a Public Private Partnership in the transportation sector.

·         Redevelopment of New Delhi Railway Station – Rs. 8,500 Crores

·         Redevelopment Gwalior, Nagpur, Amritsar & Sabarmati Railway Stations  -  Rs. 1300 Crores

·         Catering, Food plazas, Budget hotels

·         SPV – PRCL (Pipavav Railway Corporation Limited)  - Surendranagar-Pipavav new line.

·         K – RIDE - A Joint Venture named K-RIDE (Rail Infrastructure Development (Karnataka) Limited

·         Wagon Investment Scheme  - WIS

·         Parcel Services

·         Operation of Container trains

·         Private sidings

·         ICDs – Inland Container Depots

·         Railside Warehouses

·         Dedicated Freight Corridor

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