Public Private Partnership
The public Private Partnership or p3 or 3p means a partnership between public sector and private sector. Where the public sector (govt) gives up a contract of a task to private company.
Wait but why…?
- It’s a win-win situation for both public and private sectors
- Limited resources and finanace
- Need of different institutional mechanisms
- Equitable risk allocation and mitigations
- Complimentary roles and drivers
Privatization or P3.
There has a been a lot debate between economists that P3 is a privatization or not but in simple words I say no because privatization take overs the ownership from public sector completely but in P3 the ownership is atlast/mostly stays with public sector.
So to understand it by yourself let’s know what P3 is,
Generally P3 has many definations but the govt of India defines P3 as Arrangement between a private sector and public sector with 51% or more investment on private sector and risk taken on both sides to provide provisions or services which govt used to provide or planning to provide to public
So how it happens…?
There are many ways of P3 or technically we can say models like
- DB(Design build)
- DBM(Design build maintain)
- DBO(Design build operate)
- DBMO(Design build maintain operate)
- BOOT(Build operate own transfer) “where private company owns project for a period of time and transfer later to govt”
- BOO (Build own Operate)
- DBFO/M(Design build finance operate/maintain)
- Serivce contracts
- Management contracts (The difference between service contract and management contracts is, in management contracts responsibility of service and maintenance lies with private entity.)
- Lease
- Concession
- Divesture
In every model the need and service provided is of public sector which is given to private entity to make work efficient and decrease cost and maintain budget.
History of P3
P3 is not a very modern practice we can find it traces from past like
- Concessions were used by Muhammad Ali in Egypt for projects such as railway and dams.
- Most of early infrastructures in USA are under P3.
- Economically P3 is under the contract theory.
But according the ADB the 3 main reasons for government to get into P3 are
Attract private capital investments
To improve efficiency and use of available resources effectively
Reform sectors by reallocation of roles,intensives and accountability.
Barriers and challenges for P3 are:
- Hidden debts.
- Risk in transfer of ownership
- Breaking of Partnership
- More interest in getting benefits economically
- Contractual and capacity imbalance.
- Decentralisation and devaluation
- Lack of political will.
- Weakness in execution of policy and faults in maintaining regulatory framework.
- Limited capacity to manage P3.
- Varied institutional framework.
- Government of India has took some steps for improvement of P3 like
- Setup of commitee in August 2004 chaired by prime minister.
- Viability gap funding.
- Model concession agreements.
- Setup of portal and database for P3.
In india more than 60%of roads are done by P3.
In Maharashtra most of govt infrastructures are done by P3.
Examples of P3 in india are:
- Sawai mansingh hospital in jaipur.
- rajiv gandhi super-specialty hospital and yeshasvni health scheme in karnataka
- Arogya raksha in Andhra Pradesh.
- Delhi-Noida bridge project.
In india we have karnataka with highest no of projects i.e.,95 then we have Andhra Pradesh with 63 and the comes rajasthan with 49 and there are 13 inter-state projects.
SOURCES : wikipedia , WSP international consultancy report , youtube.
– SOMA SHIVA