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Public Private Partnership in India

发布时间:2018-03-30
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‘PUBLIC PRIVATE PARTNERSHIP IN INDIA’

TABLE OF CONTENTS

1. ABSTRACT

2. INTRODUCTION

3. METHODOLOGY

4. HISTORY OF PUBLIC PRIVATE PARTNERSHIP IN INDIA

5. CURRENT SCENARIO OF PPP IN INDIA

6. PITFALLS OF PPP

7. PROSPECTS OF PPP

8. CONTRIBUTION OF PPP IN ECONOMIC DEVELOPMENT OF THE COUNTRY

9. CONCLUSION

10. REFERENCES

11. APPENDIX

ABSTRACT

Public Private Partnership in India has been on rise for the past few years. As per the report of PPP India Database report on July 31, 2011 Public Private Partnership has invested total of Rs.38,332.1 Crore. As per the report of PPP India Database dated July 31, 2011 there has been an increase of 71% from Rs.224,175.75 Crore to Rs.383,332.1 Crore as compared to the previous report on November 15, 2009. It can be seen that there is a wide scope for the Public Partnership to rise in India.

In India Public Private Partnership has invested in the following sector-

ï‚· Roads

ï‚· Railways

ï‚· Health Care

ï‚· Urban Development

ï‚· Ports

ï‚· Tourism

ï‚· Power

ï‚· Education

ï‚· Airports

ï‚· Oil Fields

ï‚· Mineral Resources

The objective of writing this term paper is to find out the current scenario of PPP model in India and how it is beneficial to the Indian economy. There are many problems which private investors has to face and the challenges faced by government in making policies and making contracts with the private firms. I will analyse the pitfalls and prospects of public Private Partnerships India in building a better infrastructure and making a strong economy.

Introduction

Definition-

Public Private Partnership is the legal bonding/contract between the Government bodies/entities and the Private firms and companies to provide public service or project or infrastructure for a specific period of time.

Government forms contracts with the private entities, encourage private entities to invest in PPP models to build better infrastructure for the country which helps in growth of the country.

Public Private Partnerships helps government to focus on its core business of making policies and managing departments. Government handovers the work to private sector firms which are experts in their fields, so the work done is efficiently and is cost- effective. They are given a definite time period in which they had to perform their prescribed work. These partnerships between government and private sectors firms help in economic development and improving infrastructure of the country.

These days the government is inviting private firms to form PPPs partnership so as to develop the weak sectors and areas of the country by building and improving infrastructures as roads, power stations, hospitals, ports, etc. to improve the living standard and economy of the country. These partnerships helps the government in functional as well as financially. Public private partnership boosts the economic development of the country.

In India Public Private Partnership promoted in following sectors:

ï‚· Roads

ï‚· Railways

ï‚· Health Care

ï‚· Urban Development

ï‚· Ports

ï‚· Tourism

ï‚· Power

ï‚· Education

ï‚· Airports

ï‚· Oil Fields

ï‚· Mineral Resources

ADVANTAGES OF WORKING WITH PUBLIC PRIVATE PARTNERSHIP-

1. Quality service rendered- The private sectors provide quality service as they are experts in their particular fields and they know how to get best out of input.

2. Project is cost effective- The project they work on is cost effective as they make best use of everything as profit matters most to them and they cut costs to increase their profits.

3. Risks are shared- The projects risks are shared by the partners so that no one person is overburdened and loss is shared between them.

4. Project completion time is less- Private sectors work very efficiently, systematically and well planned so the project is completed within the given time for the project.

5. Assets are used efficiently- The use of assets is very efficient as inefficient use of assets would cost to them and cut their profits and efficiency. So assets are used very efficiently.

METHODOLOGY

Public Private Partnership is on the rise in India. As per the report of PPP India Database, Rs. 383,332.1 Crore has been invested by the private sector till 2011. The private has very wide scope in India and it will help the country to improve its infrastructure which will help in economic development of the country.

I have used the research papers, journal articles, news articles and database reports of PPP India to collect data and information regarding the term paper.

I have not used any primary data and have only used secondary data to complete my term paper.

HISTORY OF PPP IN INDIA

The Public Private Partnership in India has been started in early 19th century and late 20th century.

Some PPP projects in 19th century were-

ï‚· The Great Indian Peninsular Railway Company project in 1853.

ï‚· The Bombay Tramway Company’s Tramway services in Mumbai in 1874.

ï‚· Power generation projects in Mumbai and Kolkata in early 1900s.

Some PPP projects during the period 1990 to 2006 were-

ï‚· 86 projects were brought worth Rs.340 Billion till 2004.

ï‚· Infrastructure projects were being promoted.

Some of the PPP projects after 2006 were-

ï‚· Favorable PPP policies were formed to increase interest of private sectors in PPP models.

ï‚· There was 70% growth in the project costs. Number of projects jumps from 450 to 758 projects in this phase.

ï‚· Government makes easier policies to attract and invite more private sector firms to form PPP with the government.

In India’s eleventh plan the total spending on infrastructure decided by the government was US$ 514 billion. Government forecasted 30% of the total investment to be made the private sector to make it easier for the government in building infrastructure.

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Investment ( ₨ Crore) by Private Sector in 1990-2008

Source: PPI Database, World Bank Group

After the year 2006 the investment has rose by Rs. 63862 Crore or approximately 164% which showed a historic change for Public Private Partnerships in India.

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Sector Wise PPP Investment Costs (in Rs. Crore)- 2011

Current Scenario of PPP in India

In India with the fast growing economy and a wide scope for the sectors to grow to the peak, the infrastructure cannot cope up with the current scenario. India is the 10th largest economy in the world with the nominal GDP of 1.877 trillion USD in 2013. It has the growth rate of 5% in 2013 with the expected growth rate of 5.7% in 2014. Government has opened the FDI in many sectors through which funds are flowing into the Indian economy. Infrastructure is needed to retain foreign funds within the country for the better growth.

As per the report of PPP India Database as on July 31, 2011 there were total of 758 projects of total cost of Rs.38,332.1 Crore which were being given permit to start the project. There were total of 25 states which were adopting PPP model for building infrastructure. Andhra Pradesh was the state which had major investment costs of Rs.66,918.3 Crore followed by Maharashtra and Karnataka with Goa having the lowest investment costs of Rs.250 Crore.

These charts are showing the investment costs of different sectors of the country and showing variation of investment costs of different sectors. Chart 1 is showing reports of 2011 and chart 2 of 2009. So we can analyse the change effect in investment of these two years clearly.

Source: PPP India Database as of July 31, 2011

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100000

150000

200000

250000

Sector Wise PPP Investment Costs (in Rs. Crore)- 2009

Source: PPP India Database as of November 15, 2009

As we talk about the economy sectors there has been an increment in total investment costs from 2009 to 2011 of Rs. 159,156.3 Crore or approximately by 71% in 2 years.

Roads Sector was having major investment costs of Rs.176,724.9 Crore followed by Ports Sector with Rs.81038 Crore and Energy Sector with Rs.67244.6 Crore. The education sector investment costs have rose by 1880 times in 2 years. This is the only sector which has shown a huge rise in investment costs. The energy sector has rose by 3 times from Rs.17,110.59 Crore in 2009 to Rs.67,244.6 Crore in 2011 and has good future prospects to grow in the coming future.

The sector which lacks in investment costs was Railways sector which has shown a decline in investment costs by 2%. But in 2014 railway minister D V Sadananda Gowda has presented the budget for 2014-15 in which he has announced that the government will form Public Private Partnerships to set up freight terminals, restructuring of stations, building tracks for bullet train between Ahmedabad and Mumbai, logistics parks and building hi-tech stations.

Public Private Partnership model has come forward in Health Care sector with the investment cost of Rs.1833 Crore in 2011. Government is also trying hard to improve the health sector of the country as it is one of the sectors which has lacked behind for many years. So the government is also making easy policies to encourage investors so as to build a better health sector for the country.

It has been seen that PPP models in India are on the rise in those sectors which have lacked behind in the growth. They have given more focus on health and education sectors in these years between 2009 and 2011. But as the investors are investing in roads, ports, airports and energy sectors in abundance as it gives them more returns on their investments and helps in their financial growth, so health and education sectors are not improving as these sectors have improved in these years.

The regions which have largely adopted the Public Private Partnership in India are Andhra Pradesh, Karnataka, Maharashtra, Uttar Pradesh, Gujarat, Kerala, Madhya Pradesh, Delhi, Haryana and Sikkim. But there are differences in these regions as they have adopted PPP for different purposes. As in Delhi and Rajasthan they have invest more in roads and urban development through PPP. But in Gujarat and Uttar Pradesh they have majorly invest in the power sector.

The states like Uttarakhand, Jammu and Kashmir, Meghalaya, Goa, Assam, Punjab, Chandigarh and Chhattisgarh has not invested much in their states through PPP models till 2011. As some states like Assam, Uttarakhand and Jammu and Kashmir are new in PPP as they have not invested anything in PPP as per report of PPP India Database dated November 15, 2009.

Haryana has shown major change in investment costs in PPP from Rs. 756 Crore in 2009 to Rs. 11,163.1 Crore in 2011; approximately change of 1377% in 2 years. They have majorly invested on urban development and road sectors through PPP.

India is in need of infrastructural development as India is the 10th largest economy in the world is growing fast every year and it is a situation where the growth of the country will be obstructing by the infrastructural problems.

PITFALLS OF PUBLIC PRIVATE PARTNERSHIP

1. LONG TERM CONTRACTS- The long term contract conditions reduce the flexibility of the working and decision making. The terms and conditions cannot be changed and they cannot back out from the project.

2. MOTIVES ARE DIFFERENT- The motives of the two partners i.e., private firms and publics authorities are different. The motive of the private firms is towards the profits only and the motive of the government is to offer best services and infrastructure to the public.

3. FORMS LOCK-IN- Their contract with the government form lock-ins and they cannot alter their agreements for the lock even if they had any losses as their investment is in hold within the contract.

4. HIGH COST OF INVESTMENT- The cost invested by the private is very high as highly risky to them. It is very difficult to finance funds by them and they get loans at high interest rates, as lender risks their funds by lending them. But on the other side it is easier for the government authorities to borrow funds.

5. CHANGING GOVERNMENT POLICIES AND NORMS- The changing government norms and policies make it difficult for the private firms to lock-in in the contracts for a very long period of time. As they fear loss risks in investing as the government policies are not constant as they can change very frequently.

6. NO DETAILED PLANS AND STRUCTURES- As working with the government they face problems of lack of information, no detailed plans and policies for the project, insufficient data. So it is very difficult and slow working for the private firms as these problems costs to their profits.

7. LOW CAPACITY TO HANDLE LARGE PROJECTS- Government institutions have low institutional capacities and they are not able to handle large projects efficiently which forms situations like conflicts, distrust towards the organization, etc. and results inefficient project, which is not at all beneficiary for the private sectors.

PROSPECTS OF PUBLIC PRIVATE PARTNERSHIP IN INIDA

1. RISKS ARE SHARED- The projects risks are shared by the partners so that no one person is overburdened and loss is shared between them. Risk factor can be easily lowered and minimized by the government agencies or authorities as they can borrow the funds easily with less costs.

2. 1LONG TERM INVESTMENT OPPORTUNITIES- Opportunities can be gained for long terms by the private sector firms. If once the private sector firms have made their track records of performing well and efficiently with the public sector, they can achieve the wide scope and opportunities for them in the future to work with the public sectors in larger projects and can get funds easily as they would have good track records.

3. LONG TERM STABILITY AND GROWTH- India has shown the wider scope in economic growth and development. The opportunities are rising fast and it can be foreseen that the investments made by the private sector firms will return good returns on the investments. The long term investments could be wide and stable to give constant returns.

4. OPPORTUNITIES IN NEW SECTORS- Private sectors are getting investment opportunities in new sectors which were previously controlled and funded by the public sector enterprises only. As in 2014, government has opened the gates for the private sector to invest in Defense Sector and Railway sector is in talks to open it for private investments.

CONCLUSION

REFERENCES

ï‚· http://www.pppindiadatabase.com/Uploads/report3.pdf

ï‚· http://www.ey.com/Publication/vwLUAssets/Accelerating_PPP_in_India/$FILE/Accelerating%20PPP%20in%20India%20-%20FINAL(Secured).pdf

ï‚· http://www.financialexpress.com/news/powering-ppps-in-the-infra-sector/1298221

ï‚· http://www.pppindiadatabase.com/Uploads/Listing Criteria of PPP Projects on PPP Database.pdf

ï‚· http://jms.nonolympictimes.org/Articles/Article8.pdf

ï‚· http://ses.library.usyd.edu.au//bitstream/2123/6172/1/thredbo10-themeC-Alexandersson-Hulten.pdf

ï‚· http://europepmc.org/backend/ptpmcrender.fcgi?accid=PMC1750491&blobtype=pdf

ï‚· http://zenithresearch.org.in/images/stories/pdf/2011/Sep/18.Vol_01_Issue_05 KARUNENDRA PRATAP SINGH.pdf

ï‚· http://www.rbi.org.in/scripts/BS_VIEWContent.aspx?ID=1912

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