Professional Documents
Culture Documents
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Elements of PPP
Framework conditions Win-Win situation for all stakeholders Cost & Risk sharing arrangement Clear role definitions Partnering skills Robust monitoring system
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Evolution of Concept
In some form such partnerships always existed in social systems. One example is Olympic games dating from 776B.C and lasting more than 1100 yrs until a.D.-393 ( modern games started in 1896) Massachusetts Bay Company incorporated the private Water Works Company to supply drinking water to Boston 350 yrs ago
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Evolution of Concept
In USA during 1960s under the war and poverty programme of federal government financial resources were allocated to community of citys low income neighborhoods and community were responsible both for planning and implementation In wake of poor performance of the government delivery system and organisational effectiveness of Private Sector , in 1990s, concept got currency in many European countries
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Evolution of Concept
PPP terminology first introduced as concept in U.K. by conservative government in 1992. Private Finance Initiative (PFI) was first systematic programme aimed at PPPs Between 1997-2000, in UK, 150 PFI projects costing GBP 12 billion Similar pattern emerged in other European countries
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Evolution of Concept
In India, Community Support of government programmes was sought for construction of irrigation canals during First Five Year Plan period and such participation increased during subsequent plans Presently schemes of social sector ( like health, sanitation, family welfare etc.) have component of such community participation
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Evolution of Concept
Average city in USA, private entities deliver 23 of 65 basic municipal services from wastewater handling to Urban development ( source : National Council for Public Private Partnership) Same pattern is noticeable in other developing countries also Donor agencies like UNDP,DFID World Bank and GtZ etc. gave cognizance and support to PPP model.
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Rationale
the truth is that outside of its legitimate function, government does nothing as well or economically as the private sector of the economy. Ronald Reagan What takes the government 50 yrs to achieve can be done by the private sector in tenth of time Milton Friedman Best government is that which governs little Abraham Lincon
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Rationale
Inefficient Public Service Delivery Insufficient Resources Failure to Expand Services to meet the rapidly growing demands General distrust of government bureaucracy
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Potential Benefits
Mobilisation of more resources Cost effectiveness Higher productivity Accelerated delivery Customer focus Enhanced social service Recovery of user charges
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Potential Benefits
Opportunities for additional resources Mitigates and properly allocates risks Attract the right skills and management Reduces corruption and waste Promotes innovation Reduce burden on taxpayers Improved service coverage Enhanced quality in services
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PPP in Railways
Several models of Private - Public Partnership are now being used in various infrastructure projects in the Transport Sector including Railways. The spectrum of projects varies from leasing out of Government owned facilities to BOO (Build, Own, Operate) and BOT (Build, Operate and Transfer).
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While it is possible for other infrastructure projects in ports, highways & airports to be an independent system which could be operated and maintained independently of the existing system, the same is not possible for Railways. Here any project has to be supplementary or an extension to an existing larger railway network. Due to this historical perspective, railway activities are not readily available to private sector which poses a new challenge of building capacity with private sector through PPP.
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Different forms of PPPs as well as different models of privatization have been tried out by different countries. The two privatization models which have been implemented with a fair degree of success are the British Rail Model and the Japanese Rail Model.
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Both these countries have adopted different strategies to reach the same objectives: reducing dependence on Government funding while improving the quality of services and delivering value to the customer.
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Freight operators, unlike passenger operators, are not franchised. They are fully independent companies which invest in their own assets, decide their own business strategy, and negotiate access to the track directly with Network Rail. The Government controls the working of the rail entities through the Department of Transport and passenger freight subsidies are paid directly to the operators.
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c) Privatization of railways does not mean that the Government gives up its social objectives. It can continue to achieve its social objectives through the HLOS as in the case of Great Britain and also subsidize certain routes which are unremunerative.
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d) Privatization of railways does not mean unprecedented freight and fare increases. On the contrary, with proper regulation, increased competition can drive down costs and lead to greater operational efficiencies as has been witnessed in Japan. e) Political interference with the structure of the railway inevitably drives up costs and reduces quality of the service provided. While developed countries may be able to afford this luxury, it is clearly beyond the capacity of the developing countries where these factors are best determined by market forces f) Separation of train services and infrastructure management leads to greater focus on each of the activities and delivering better value and service to the customer.
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It must be noted that in spite of such dire need of funds in IR and the limited nature of its surplus, the IR has followed a cautious approach in inviting private sector participation in IR.
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Political Climate
In order to avoid hitting any political roadblocks later, it is imperative that the Blueprint for PPP s in IR should have political legitimacy and acceptance cutting across party lines. Private sector participation be invited in areas which require immediate attention and that too where the private sector is capable of reducing costs and improving the quality of service.
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Technical Assistance
Institutionalization of PPP skills includes
refining the PPP policy and regulatory framework, meeting compliance/public safety norms, improving MIS, improving bidding documents and procedures, determining risk sharing, conducting value-added research/analysis, and determining adequate monitoring arrangements
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Outcomes
The technical assistance aims to: Help the participating State implement PPP schemes effectively and efficiently; Enhance capacity of PPP cells in participating entities to prepare, evaluate, and appraise PPPs in infrastructure; Significantly improve monitoring of overall progress in PPPs in infrastructure at both central and state levels through well-knit databases; Increase awareness among potential private sector partners about the project cycle of PPP projects in infrastructure, and the expectations of Government with respect to value for money; and Over the long term, an increase in private sector participation in infrastructure development and management throughout the country
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THANK YOU
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