Public-Private Partnership (PPP): Notes for UPSC Exams

A public-private partnership (PPP, 3P, or P3) is a cooperative arrangement between two or more public and private sectors, typically of a long-term nature.

This article gives details about the concept within the context of the IAS Exams.

How important is the Public-Private Partnership?

Financial and managerial resources are critically required for successful implementation and more so, the sustainability of e-Governance initiatives. While the normal preference for any reform initiative is through the exclusive use of in-house resources, the merits of inducting the private sector resources into the e-Governance sector have now been appreciated and accepted by policy-makers in Government. Public-Private Partnership has thus become one of the cornerstones of NeGP. PPP, as applied to the e-Governance sector is still in a stage of evolution. While early PPP projects like eSeva had attempted a simple version of PPP, more complex projects like MCA 21 required considerable innovation and experimentation in designing and adoption of an appropriate PPP model. The following is an attempt to examine PPP in light of the significance of the e-Governance sector.

New technologies demand new types of implementation models. In the conventional approach, the project ownership lies with the public sector itself along with the responsibility for funding it and bearing the entire risk. The concept of PPP has been in operation for more than a decade, primarily in relation to the construction and operation of public infrastructure projects like bridges, airports, highways, hospitals etc. PPP is a mechanism that attempts to capture the strengths of both – a government organization as well as a private enterprise.

There are many compelling reasons why governments should look at PPP in relation to their e-Governance plans. Some reasons are enumerated below:

  1. Combining accountability with efficiency: The PPP model can combine the accountability mechanisms and domain expertise of the public sector with the efficiency, cost-effectiveness and customer-centric approach of the private sector. As compared to the public sector, the private sector is more efficient and innovative in adopting and applying new technologies. This is also true in the specific case of Information and Communications Technology. Therefore, the PPP approach in the field of e-Governance is well suited in combining the core strengths of the public and private sectors for the delivery of efficient online services.
  2. The pace of implementation: New innovations in the field of Information Communication Technology are happening at a fast rate. This applies to all its segments – hardware, software and networks. Newer versions and releases of operating systems, database servers, application servers, and security software are continuously being released at regular intervals. The typical life cycle of a large e-Governance initiative is 18 to 24 months from initiation to completion. It has been observed that the private sector is generally faster than the government in adopting and making use of the latest technology. This is a compelling reason to join hands with the private sector.
  3. Resources: The combined effect of the huge size of e-Governance effort and the speed of implementation is that investments required in the e-Governance sector are very large over a continuous period of 5 years. It is estimated that India needs over Rs 45,000 crore of investment in the e-Governance sector over a period of 3-5 years – excluding the cost of communication and access infrastructure. This is sixteen times higher than the current annual IT expenditure of about Rs 3000 crore in the government sector. In addition to this, high quality managerial and human resources are required. It is difficult to mobilize such large amounts of financial and human resources within the government. Tapping the financial, managerial and manpower resources of the private sector is a viable alternative in this regard.

To know more about other Government Schemes, visit the linked article.

Implementation of the PPP Model

The PPP model of implementation is more suitable for particular areas of e-Governance and not to all. The criteria for PPP include long-term nature of the demand for a service, profitability and amenability to structuring a commercial framework and business model for PPP. The following is an illustrative list of areas suited for PPP.

1. Information Infrastructure Projects

  • Data centres
  • Communication backbone
  • e-Governance gateway

2.Government-to-Citizen Projects

  • Citizen service portals
  • Integrated service centres
  • Departmental service centres
  • Networks of kiosks, like CSCs

3. Government-to-Business Projects

  • e-procurement
  • G2B portals

4. Government-to-Government Projects

  • Online data-capturing and central consolidation (e.g. treasury computerization and networking)

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Challenges of the PPP Model

Public-Private Partnership projects also pose several challenges which need to be understood and addressed carefully. There is often a lack of congruence in the objectives of the two partners – government and the private sector. The success of PPP depends on the degree to which the public and private sector partners align their efforts in achieving these objectives. Clarity on objectives has to be achieved by both the parties at the outset.

Also, the organizational cultures in the private and public sector differ widely. This may result in conflicting situations since e-Governance involves substantial process reform needing interaction between the partner company and the government agency or agencies in charge of the ‘domain’. It is necessary to create an appropriate coordination and review mechanism that develops mutual trust and confidence. Also, the agreements defining the mutual role and responsibilities should be precisely drafted, following a transparent process of selection of the private partner.

Public-Private Partnerships (PPP) – Recent Developments

  • Health Sector –  NITI (National Institution for Transforming India) Aayog has come out with Public-Private Partnership (PPP) Model to bring changes in the Health Sector. As per this PPP model developed by NITI (National Institution for Transforming India) Aayog, the gap in medical education will be addressed and the shortage of qualified doctors will be addressed. As per this model, existing or new private medical colleges will be linked with functional district hospitals.
  • Power Sector Government of India is planning to launch the Atal Distribution Transformation Yojana (ADITYA) Scheme. As per this scheme, if states will involve private sectors to improve the efficiency of state distribution companies (discoms), then the Central Government will provide incentives to the States. Such a scheme did not exist earlier. If Indian needs to become a $ 5 trillion economy then it requires a healthy power sector. The 3 important segments of the power sector are distribution, transmission and power generation. If progress needs to be done in desired pace and direction, then the distribution segment needs to be established as the strongest link hence the Central Government is focussing on increasing efficiency of the Distribution segment through ADITYA Scheme. Most of the developed countries have privatised their power distribution segment. The Public-Private Partnership model in Delhi was introduced in 2002, has proven to be a success. Delhi Vidyut Board was privatised by selling its majority stake (51%).
  • RailwaysTejas Express is the 1st private train in India. Under the Public-Private Partnership (PPP) model, the services in the Tejas Express will be provided by private players. Services will include housekeeping, catering, ticketing, refunds, parcels. The Physical infrastructure for the Tejas Express will be Indian Railways. It includes coaches, locomotives, guards, loco pilots, guards.
  • Urban HousingThrough Public-Private Partnerships (PPP), Government-funded housing in cities or urban areas will be converted into Affordable Rental Housing Complexes (ARHC). This will be done so that migrants can avail housing at concessional rates in cities or urban areas.

Relevant Links

Candidates can visit the UPSC Syllabus page to get a general idea about the topics that will be asked in the exam. You can get more exam related preparation materials and other related articles by visiting the links given in the table below.

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