Preparing the PPP Phoenix to Fly: Redesigning Frameworks to Match Emerging Vistas
| Author | Roopali Gupta,Prateek Kumar |
| Published date | 01 January 2016 |
| Date | 01 January 2016 |
| DOI | http://doi.org/10.1177/0019556120160102 |
| Subject Matter | Article |
PREPARING
THE
PPP PHOENIX TO FLY:
REDESIGNING FRAMEWORKS
TO
MATCH
EMERGING VISTAS
PRATEEK KUMAR AND ROOPALI GUPTA
In the wake
of
falling interest
of
the private sector
in
taking
public
projects due to high risk
and
limited availability
of
debt finance, and keeping
in
view the impossibility
of
meeting the infrastructure gap
of
India without private
participation, this article aims at.finding the flaws
of
the
current PPP framework and suggesting amendments to
match the challenge
of
crowding-in private investments
for
public
projects.
This
article
discusses
various
models and mechanisms
for
achieving sustainable
and
cost-efficient 'project
finance'
or
'funding
structures'
and highlights government schemes that have enabled
or
incentivised the usage
of
new financing options.
It
critically examines the various drawbacks
present
in
the existing PPP framework and evaluates
and
makes
detailed suggestions on the structural changes required
in
it
to make
it
attractive
to
investors
and
successful
in results.
It
also evaluates the changes brought
and
proposed in the PPP framework such as 'plug-and-play'
mode, the Swiss Challenge Method, and Hybrid Annuity
Model. The
public-private-people-partnership
or
4P
model is given not only in its theoretical context
but
also
in its functional sense
by
graphic representation
of
the
framework and
by
taking examples
of
new government
initiatives in this direction.
INTRODUCTION
THE PUBLIC-PRIVATE PARTNERSHIP (PPP) model
of
development is
the preferred model
of
development as it creates synergy
by
accentuating
and improving the process
of
development with private sector balancing the
lacunas
of
the public sector and vice versa. PPP combines the agility
of
the
JO
I INDIAN JOURNAL
OF
PUBLIC
ADMINISTRATION
VOL.
LXJI.
NO.
I,
JANUARY-MARCH
2016
private sector with the social responsibility obligation
of
the public sector.
Governments in developing as well
as
developed countries are using PPP
arrangements
as
a preferred method for improved delivery
of
services as it
lays the groundwork for greater transparency in the allocation
of
costs
of
an activity
of
public interest.
PPP model is hailed as a mechanism for optimising the performance
of
public duties; achieving optimum cost-effective ratio; overcoming
limited
budgets;
substituting
the
lack
of
economic
strategies
and
ideas in public sector; supporting reasonable outsourcing
based
on
necessary modernisation
of
the public sector; supporting
of
structural
changes; creating new business opportunities for the private sector; and
supporting good relations between the public and private sector wherein
the government can not only successfully disinvest but also enhance
capacity building. The role and scope
of
PPP in India is not
just
limited
to developmental activities
but
it is also being considered as the tool to
fight the growing unemployment and poverty.
As a policy response to the gap
in
infrastructure, India has committed
to increasing the infrastructure spending from an estimated eight per cent
of
the Gross Domestic Product (GDP)
in
2011-12 to about 10
per
cent
of
the
GDP by the terminal year
of
the 12th Plan (2016-17). In terms ofresources,
it means that an estimated 45 lakh crore rupees would be required
by
the
sector. The adoption
of
the PPP model accounted to a little over 30 per cent
of
the investments in infrastructure sector in the Eleventh Plan and this share
may have to rise to 50 per cent in the 12th
Plan.
An effective PPP framework can help to ensure a strong private sector
response. This involves establishing a clear rationale for PPP policy backed
by well-thought-out legal, regulatory and investment frameworks which
needs to be broadcast to potential investors. In addition, a strong institutional
platform is required to help shape and deliver policy, prepare and procure the
project outputs and manage or regulate the associated project agreements.
It is vital that potential investors and the public administration itself see
ownership
of
the framework at this level.
FINANCING PPP PROJECTS
The World Economic Forum notes that in order for public-private
partnerships to be successful, the environment must be conducive for the
formulation and implementation
of
such arrangements. More often than not,
states are yet to create appropriate reforms and policies that are essential
for the fruitful proliferation
of
partnerships. Three broad and interrelated
components shape the expectations
of
the investors, namely, the macro-
economic situation, governance, and infrastructure.
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