Public Private Partnerships

Presented by Jerry Fay, PE

Supervised By- Dr. Kalyan Ghadei Department of Extension Education Institute of Agricultural Sciences

Presented byKumar Abhishek ID No. 11072 Department of Extension Education Institute of Agricultural Sciences

Contents

Introduction Definition Why PPP models in India

Flow chart of PPP process PPP Program Management Summary PPP Project process management Roles in PPP Main features of PPPs Basic Dimensions of PPP

Contd

Benefits Strength Weakness Examples of PPP in India Case study SWOT analysis of case study Risk involved in PPP Drawbacks Misconception Reason of failure References

Introduction

The most significant criteria for a continued growth rate of an economy is rests on the provision of a quality infrastructure. According to the Planning Commission, an approximation of 8 percent of the GDP needs to be invested. The investment sectors under consideration are inclusive of telecommunications, electric power, water transport, road, rail, air, water supply as well as irrigation amounts to about Rs. 20,27,169 crore according to 2006-07 prices. In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure projects.
Source-www.pppindia.com

Public Private Partnership FHWA Definition

A public-private partnership is a contractual agreement formed between public and private sector partners, which allows more private sector participation than is traditional. PPP is the new face of development where the state & private actors, work in collaboration & cooperate with each other to further common goals of a market driven growth oriented agenda.

Source-www.pppindia.com

The Government of India defines PPPs

A partnership between a public sector entity (sponsoring authority) and a private sector entity for the creation and/or management of infrastructure for public purpose for a specified period of time on commercial terms and in which the private partner has been procured through a transparent and open procurement system. (Department of Economic Affairs, Ministry of Finance, Government of India, 2007)

Source-www.pppindia.com

Why?

Traditional funding sources are not keeping pace with investment needs and the growing public demand for services. In short, Public Private Partnership is a tool that can help governments meet demands for the development of modern and efficient facilities, infrastructure and services while providing value for taxpayers.

Source-www.pppindia.com

PPP models operated in India via

Public contracting Passive public investment (equity, debt, guarantee, grants) Joint ventures long-term contractual agreements (BOT, BOOT, BOLT)

Source-www.pppindia.com

Flow chart of PPP process

Project Identification
Need Analysis Option Analysis Feasibility Analysis PPP Suitability Decision

Readiness Check I
PPP preparation & clearance
Draft Preparation In Principal Clearance

Readiness Check II
PPP procurement
Short listing Final Document Final Approval Tendering Evaluation & Award of PPP

Readiness Check III

Contract Management & Monitoring
Preparation for Contract management Contract Management & Monitoring
source-www.mbaskool.com

PPP Program Management Summary

GENESIS
Prelim Project Definition Seed Funding

FEASIBILITY
Objectives Register Alternatives Index Prelim Schedule/ Budget Prelim Economic/ Financial Analysis Qualitative Analysis Fatal Flaw Analysis Process Map & Strategy Feasibility Report/ Project Approval

PLAN & TEST

Asset/System Evaluation Site Selection/ Analysis Environmental/ Permitting Analysis Final Project Definition Master Schedule/ Budget Political Climate Assessment Procurement Strategy Prelim Business Plan Public/Vendor Outreach & Stakeholder Consultation Business Plan

PROCURE
Risk Assessment/ Allocation Delivery Methodology Commercial Terms /Contract Principles Deal Structuring Concept Design/ Performance Specs Procurement Documents Vendor PreQualification Vendor Proposal Evaluation Contract Negotiations

IMPLEMENT
Design Compliance Construction Oversight Commissioning Administration

OPERATE
Startup Monitoring Assessment Enhancement Contract Mods Contract Renegotiations

source-www.mbaskool.com

Roles in PPP

Source-http://www.pppinindia.com/overview.php

Main features of PPPs

Cooperative and contractual relationships Shared responsibilities A method of procurement Risk Transfer Flexible Ownership

source-www.mbaskool.com

Four Basic Dimensions of P3

Shared goals

Shared benefits

Shared resources

Shared risks

source-www.mbaskool.com

Benefits
Expedited project completion Project cost savings Improved quality Use of private resources Access to new sources of private capital

source-www.mbaskool.com

Typical Uses
Renovate Construct Operate Maintain Manage A facility or system

Potential Areas of PPP

Roads Telecommu nication Transport Health Education Irrigation Marketing Energy Social Welfare

Typical Funding Sources

Tolls Tax Increment Finance Fees Grants Loans Bonds Other Revenue Streams
source-www.mbaskool.com

Strengths
The major strength of PPPs is their ability to deliver value for money in public service procurement and operation. By utilizing the differing skills, resources and experience of each party, they allow the public and private sectors to complement each other the public sector provides its expertise in identifying public needs, service requirements and desired outcomes, and the private sector brings its capacity to effectively utilize assets and manage the construction and operation of services.

Source-www.jurisonline.in

Weakness
There is the possibility that the public sector may lose managerial control of its services. The process of PPP procurement can be time consuming and expensive. There is the problem of the higher cost of finance in the private sector. PPPs can sometimes prove to be rather inflexible instruments especially given the long term nature of most PPP contracts. In some areas of public service provision there may be greater public demand for accountability and responsiveness than in others. This may give rise to public criticism or even hostility towards PPP Source-www.jurisonline.in arrangements.

Contd

Sufficient instruments as well as the ability to undertake longterm equity cannot be provided by the market in the present financial scenario. Most sectors face a lot of hindrance in enabling a regulatory framework as well as a consolidated policy. Lack of ability of private sectors to fit into the risk of investing in diversified projects also needs to be overcome. Lack of credibility of bankable infrastructure projects used for financing the private sector should also be overcome. Inconsistency is still visible in the limitations of PPP projects, Inadequate support to enable greater acceptance of PPPs by the stakeholders forms another source of constraint.
Source-www.jurisonline.in

Total No. of Projects in India

Sector Wise
Total No. of projects
Others 5%

State Wise
Total No. of Projects

Tourism 7% Energy 7% ports 8% Roads 53%

Karnataka 14%

Others 44%

Andhra pradesh 13%

Urban developmen t 20% Gujarat 8%

Madhya Pradesh 11% Maharashtra 10%

It shows roadways project has large share of projects Karnataka has largest share of projects

In 2010
source-http://www.pppinindia.com/database.php

Contd

As far as current status of projects is concerned, there have been 758 PPP projects in our main sectors of focus where a contract has been awarded and projects are underway in the sense that they are either operational or at least construction/implementation is imminent. The total project cost is estimated to be about Rs. 383,332.06 Crore.

Examples
S.No. Name of Projects Alandur Underground Sewarage Project Sector State & year of projects TamilNadu 2000 Public Sector Private Sector Project Cost Rs. 34.6 crore (Sewerage Network) Rs. 6.68 crore (Sewage Treatment Plant) Concession Period O&M Contract 5 years BOT Annuity 14 years 1 Sewarage Alandur Municipality and the Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL) IVRCL Infrastructures and Projects Ltd and Va Tech Wabag Technologies Ltd.

Karnataka Urban Water Supply Improvement

Urban Water Supply

Karnataka 2005

Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) National Highways Authority of India

Veolia Water (formerly known as Compagnie Generale des Eaux, France)

Rs. 32 crore

42 months (Later extended to 59 months)

Delhi Gurgaon Expressway

Roads Expressways

Delhi and Haryana 2002

DS Constructions and Jaiprakash Industries

Reliance Energy Limited, Veolia Transport (France) and MMRDA

Rs. 1,175 crore

20 years

Mumbai Metro

Urban Infrastructure Mass Rapid Transport

Maharashtra 2007

Mumbai Metropolitan Region Development Authority (MMRDA) Department of Transportation (DoT), Government of Punjab

Rs. 2,356 crore

35 years

Amritsar Intercity Bus Terminal

Urban Transport

Punjab 2004

Rohan Builders (India) Pvt Ltd., Rajdeep Buildcon Pvt Ltd and Rajdeep Road Developers Pvt. Ltd.

Rs. 21.34 crore

11 years 5 months

source-www.toolkit.pppindia.com

Agriculture

The National Horticulture Mission was launched during 2005-06 for the holistic development of horticulture by adopting an integrated approach duly ensuring backward and forward linkages including marketing. The NHM provides for setting up of different types of markets viz. Wholesale Markets, Rural Markets and Apni Mandis/Direct Markets. The present marketing system is characterized by a long, fragmented supply chain and high wastages. This calls for an alternative marketing structure that provides multiple choices to farmers for sale of produce along with a comprehensive solution to meet key needs of the stakeholders. With this in view, the Terminal Markets (TM) have been conceptualized and introduced as a new item under the NHM, which will be implemented in a Public Private Partnership (PPP) mode. Success Story:

In Thane the concept of Public Private Partnership has enabled to explore the spectrum of possible relationship between public and private actors for cooperative provision of infrastructure services.
source-www.Public Private Partnerships In India - News Letters

Case Study-facts
-NRHM in Arunachal Pradesh

The District Health Mission (DHM) has to be led by the Zila Parishad. The DHM has to control, guide and manage all public health institutions in the district, Sub-Centres, PHCs and Community Health Centres (CHCs). PRIs have to be involved in the Hospital Management Committees for good hospital management. It also aims at ensuring that health related database is available to all stakeholders, including Panchayats at all levels. NRHM report also elaborates upon constitution of Hospital Management Society for district hospital, CHCs and PHCs, after which maintenance grant of Rs. 1 lakh shall be released by the Government of India. To ensure the decentralization and empowerment of local bodies, there is facilitation of village health planning under the guidance of village Health and Sanitation Committee of the Gram Panchayat. NRHM aims at exploring models of Public-Private Partnership (PPP) to supplement with services in the district, like contractual engagement of district paramedics, hiring services of district specialists on payment of remuneration, and contracting out services to NGOs/accredited private health facilities in the district Source-www.pppinindia.com/pdf/Bulletin3PJanuary2011.pdf

SWOT analysis of Case StudyNRHM

Strength
Increased availability of doctor Increased availability of medicines Increase responsiveness of government health facilities to local needs Increased competition Application of innovative methods of service delivery

Weakness
Opportunitie s Threats

Insufficient incentives PPP is unequal Sole dependence on the Project Manager Lack of support from other departments of district

Indigenous system of medicine Additional increments or incentives for the paramedical staffs posted at distant terrains International funding

Inadequate education and awareness Accountability Risk sharing Lack of sustainability

source-www.mbaskool.com

Risk involved in PPP

Regulatory
Operational & Maintenance

Political

Cost overrun Risk

Commercia l

Risk
Technology risk

Financial

Construction Risk

Market risk Land acquisition Risk

Sourcewww.pppinindia.com/cpp_pdf_files/Risks_in_PPP_projects_western_india_Goa_Me eting_Vijay_Sarma.pdf

Misconceptions about PPPs

They are the same as privatization Public authorities lose control over service provision PPPs only apply to infrastructural projects The principal reason to follow a PPP route is to avoid public sector debt Service quality will decline Public sector staff will lose out The cost of the service will increase to facilitate private profit The public sector can finance services at a lower cost than the private sector

Source-www.jurisonline.in

The provider may assume control, leading to unbalanced decisions that do not reflect the interest of the public sector People within either sector may fail to understand their roles and responsibilities Disputes and misunderstandings may arise Progress may be slow The desired benefits may not be achieved Possibilities for improved performance or value for money might be lost.

Reasons of Failure of some PPP projects

Source-www.jurisonline.in

Web References
www.pppinindia.com/cpp_pdf_files/Risks _in_PPP_projects_western_india_Goa_ Meeting_Vijay_Sarma.pdf www.cehat.org/go/uploads/PPP/deepak milipaper.pdf www.pppinindia.com/pdf/Bulletin3PJanu ary2011.pdf Public Private Partnerships In India News Letters How to improve PPP projects in India: A Learning from the Past | MBA SkoolStudy.Learn.Share.

Thank you