Public–Private Partnerships in India

Public-private partnerships (PPP) in India are among the best tools for carrying out massive infrastructure and developmental projects in the country. They are called so because they involve a formal contractual relationship between the government of India (public) and a private company (or companies). They work well because the involvement of a private entity brings the best talent on board, which helps the project to get completed within the stipulated time. With the government’s support, there are no legal barriers to the completion of the project. The investment can either be done partly by the private entity or not, depending upon which model of PPP is employed.

History of Public-private Partnerships In India

The exact time when PPP was first employed in India cannot be pinpointed. However, many believe that investment by high-net-worth individuals and companies in the railroad project implemented by the British government in India was one of India’s first instances of public-private partnerships. 

Later on, private companies like Tata played a phenomenal role in the Tata Hydroelectric Power Supply Company” in the mid-90s, which helped supply power to several households in Maharashtra. Private players also invested heavily in the Calcutta Electric Supply Corporation, the public project meant to supply power to Kolkata.

In 1991, the government under the leadership of then Prime Minister PV Narasimha Rao came up with several liberalisation policies that opened doors for private players to invest in public projects. The power sector, for example, was earlier restricted to the government only. After these economic reforms, private companies could also set up their plants and help realise the government’s goal of supplying power to every nook and corner of the country.

Private entry was allowed in the construction and development of national highways in 1995. Since then, the situation of highways in the country has improved tremendously, and even today, private companies make considerable investments in this sector. 

Why is the Public-private Partnerships model needed In India?

The question is why public-private partnerships are needed in the first place. Can’t the government recruit enough talent on its own and make the most out of it? What is the advantage for private companies? Well, PPP has the following advantages:

1. Better infrastructure: Private players leave no stone unturned when it comes to the quality of the projects. Subpar quality was a common problem with projects done solely by the government. The entry of private players keeps the quality in check.

2. Risk sharing: The risk is shared by two parties, and hence neither suffers a considerable loss. Also, the government’s resources are more wisely used owing to better resource allocation by private companies.

3. More scope for innovations: Private companies are known for their innovative processes, products, and techniques that help solve a problem more efficiently. 

4. Funds not blocked: Government funds can be utilised to solve more social problems when private players take up certain projects. 

5. Catalyst for economy: It is advantageous for private entities too to invest in public projects. In the long-term, they can garner huge profits for them. For example, if a private company builds a highway, then after a while, it can start making profit from the toll collection.

Types of PPP Models

1. Hybrid Annuity Model (HAM): 60% of the investment is made by the private entity and 40% by the government. The private entity is responsible for construction and management. The ownership remains in the public hands.

2. Build-Operate-Transfer (BOT): In this model, the private player is responsible for strategizing, designing, constructing, and managing the project. The ownership remains with the public. However, the revenues are collected by the private player.

3. Build-Operate-Lease-Transfer (BOLT): The private player gets a concession from the government to own, build, and design the facility. The private player can then lease it out to the government for a stipulated period. When the lease period is over, the ownership goes to the government.

4. Engineer-Procure-Construct (EPC): The private entity is involved in the construction part, but it plays no role in managing it once the construction is over and has no right over the revenues either. It receives a fixed, predetermined sum of money from the government for its service over a fixed duration.

List of PPP projects in India

The list of PPP projects in India is as follows:

1. Metro Rail Policy allows private companies to invest in the metro construction and design in urban areas.

2. Under the Atal Distribution Transformation Yojana (ADITYA) Scheme, the states will receive incentives from the centre if they involve private players in the power sector. 

3. The railway sector has mainly been publicly controlled. Tejas Express is the first train that was approved under PPP.

4. Affordable Rental Housing Complexes (ARHC) would be set up via PPP to improve urban housing conditions. This would let migrants get access to sturdy houses at concessional rates.

5. PPP is now being introduced in the healthcare sector as well. The distribution of vaccines during COVID-19 was a prime example of this. Private companies manufactured vaccines while the government was responsible for making the vaccines available to the public at concessional rates.

Conclusion

Public-private partnerships in India are the key to realise the goal of making India a $5 trillion economy. PPP is not devoid of challenges. There are multiple risks like land risks, demand and supply risk (demand not in sync with the supply) and maintenance risks. Moreover, there have been cases where PPP projects became a tool of capitalism. However, there is a lot of scope for improvement in PPP. It can be a good tool to solve various problems in the economy and society as a whole.