Define public private partnership.Explain its advantages.
Define public private partnership.Explain its advantages.
Public Private Partnership (PPP) refers to the involvement of private enterprises in the form of management expertise and for financial contribution in government projects for public benefits. A public partner may be a central government or a state government or a local body. A private partner may be either an Indian private enterprise or two or more enterprises of foreign private enterprise or enterprises. For e.g.- a number of highway projects have been taken up under PPP.
Features of PPP are explained below ;
1. Contractual Relationship - PPP is a contract between public sector authority and private sector organisation in which private sector organisation provides its services and bears the financial, technical and operational risk for implementing a project meant for public benefits.
2. Pertaining to High Priority Projects and Projects for Public Welfare - PPP is suitable for high priority projects such as infrastructure sector. PPP is used in the public welfare projects e.g.Delhi metro constructing bridge and so on.
3. Choice of Partner by the Government - Government has the sole right to choose the partner to whom the contract may be given. For choosing the partner the government may adopt any one of the following methods, competitive bidding or competitive negotiation with suitable organisations and selecting the most suitable.
4. Payment Mechanism- The government may pay to the private partner i.e. an alternative way-contractual payment for implementing the project grants-in -aids to cover a part of the project cost or giving right to the partner to levy a charge on the users of the facility (for e.g. toll tax on bridges constructed under PPP).
5. Sharing of Revenue - The revenue of PPP is shared between government and private partner in an agreed ratio. The main problem with PPP projects is that private investors get a rate of return that is higher than the government bond rate even though most of the risk is borne by the public sector.
Advangates of PPP
(a) Direct involvement of Government: Government is involved in the PPP directly. It only prescibes various standards which the private partner has to adhere in implementing the project but also the service charge to be levied on the users of the facilities.
(b) Wider choice: Government has the sole right to choose the partner to whom the contract may be given forchoosing the partern, the government may adopt any one of the follwoing methods: competitive bidding inviting organisation, willing to work as partner and selectivng the best or competitive negotiation with a suitable organisation and selecting the most suitable.
(c) Econimic Development: PPP is confined to operating maintaining and mannaging such projects which are essential for the econimic development of the country, requiring consideralbe investment and project expertise.
(d) Increased Resources : PPP is generally between the government and the private sector parter which are in similar business. The huge investment of the public sector when combined with efficient management of private sector contributes to higher profits from these project. Thus PPP contributes to optimum utilisation of resources for public benefits.
Public Private Partnership (PPP) refers to the involvement of private enterprises in the form of management expertise and for financial contribution in government projects for public benefits. A public partner may be a central government or a state government or a local body. A private partner may be either an Indian private enterprise or two or more enterprises of foreign private enterprise or enterprises. For e.g.- a number of highway projects have been taken up under PPP.
Features of PPP are explained below ;
1. Contractual Relationship - PPP is a contract between public sector authority and private sector organisation in which private sector organisation provides its services and bears the financial, technical and operational risk for implementing a project meant for public benefits.
2. Pertaining to High Priority Projects and Projects for Public Welfare - PPP is suitable for high priority projects such as infrastructure sector. PPP is used in the public welfare projects e.g.Delhi metro constructing bridge and so on.
3. Choice of Partner by the Government - Government has the sole right to choose the partner to whom the contract may be given. For choosing the partner the government may adopt any one of the following methods, competitive bidding or competitive negotiation with suitable organisations and selecting the most suitable.
4. Payment Mechanism- The government may pay to the private partner i.e. an alternative way-contractual payment for implementing the project grants-in -aids to cover a part of the project cost or giving right to the partner to levy a charge on the users of the facility (for e.g. toll tax on bridges constructed under PPP).
5. Sharing of Revenue - The revenue of PPP is shared between government and private partner in an agreed ratio. The main problem with PPP projects is that private investors get a rate of return that is higher than the government bond rate even though most of the risk is borne by the public sector.
Advangates of PPP
(a) Direct involvement of Government: Government is involved in the PPP directly. It only prescibes various standards which the private partner has to adhere in implementing the project but also the service charge to be levied on the users of the facilities.
(b) Wider choice: Government has the sole right to choose the partner to whom the contract may be given forchoosing the partern, the government may adopt any one of the follwoing methods: competitive bidding inviting organisation, willing to work as partner and selectivng the best or competitive negotiation with a suitable organisation and selecting the most suitable.
(c) Econimic Development: PPP is confined to operating maintaining and mannaging such projects which are essential for the econimic development of the country, requiring consideralbe investment and project expertise.
(d) Increased Resources : PPP is generally between the government and the private sector parter which are in similar business. The huge investment of the public sector when combined with efficient management of private sector contributes to higher profits from these project. Thus PPP contributes to optimum utilisation of resources for public benefits.
