PUBLIC-PRIVATE PARTNERSHIP (PPP)
Source: PIB, Investopedia
Context
The Department of Economic Affairs, Ministry of Finance has empanelled 12 Transaction Advisers for Public-Private Partnership (PPP) Projects to provide the necessary support to Projects Sponsoring Authorities in the transaction of PPP projects.
Key points
- In the Union Budget 2022-23, the Government of India has announced its intention to create an enabling environment for stepping up private investment in infrastructure.
- The Government also launched a Scheme (VGF Scheme) for financial support to Public-Private Partnerships (PPPs) for infrastructure projects which are economically justified but commercially unviable.
- This endeavour requires Central, State and Local Government level, Project Sponsoring Authorities to have access to quality advisory support for viable PPP transactions.
- There has also been a demand from State Governments and their agencies for an enabling framework to eliminate delays in the appointment of transaction advisors or consultants for preparing a shelf of bankable projects.
| To create an enabling environment for stepping up private investment in infrastructure to cater to state Government's demands the TA panel is made available to all Central Ministries, State governments, statutory Bodies, Public Sector Enterprises (PSE) and other such undertakings within the purview of Ministries or Departments of Government of India and State Governments either undertaking or intending to undertake PPP Transactions. |
The Panel will help to make the process of appointment of transaction advisors or consultants
Effortless
By Smooth the tendering process for the engagement of transaction advisors for PPPs.
Efficient
By enabling fast access to firms that have been pre-qualified against relevant criteria.
Effective
Ensuring transparency and accountability through a clear definition of the processes, roles and responsibilities of the agencies and the private sector, leads to the preparation of bankable PPP projects.
Public-Private Partnership
- It involves collaboration between a government agency and a private-sector company that can be used to finance, build and operate public transportation networks, parks and convention centres.
- Financing a project through a public-private partnership can allow a project to be completed sooner or make it a possibility in the first place.
- Cost overruns, technical defects and the inability to meet quality standards are the risks for private enterprises.
- Agreed-upon fees may not be supported by demand for the public partners for example toll roads or bridges.
Advantages
- Improves the operational efficiency of providing public services.
- 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.
Disadvantages
- Physical infrastructure such as roads or railways involves construction risks for the private partner.
- If the product is not delivered on time exceeds cost estimates or has technical defects, the private partner typically bears the burden.
Types
Build Operate Transfer (BOT)
The Government handed over all construction and operation to a private party for some time and after it was transferred to the government.
Build Operate Own (BOO)
The same as a BOT, but the Private entity is not required to ever transfer the project to the government.
Design-Build (DB)
The Government contracts with a private party to design and construct a project for a fee.
The government retains ownership and may either operate it or contract out operations.
Buy Build Operate (BBO)
The government sells a pre-existing project that has already been completed and operated by the government for some time to a private party and will take it over fully.
The private party may need to invest in rehabilitating or expanding the project.
