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Public-Private Partnership (PPP)

107.

Public-Private Partnership is an approach under which services are delivered by the private sector

(non-profit / for profit organizations) while the responsibility for providing the service rests with the government. Three things generally distinguish PPP from direct provision of services by governments, namely a partnership based on well articulated ‘contract’, a long term relationship between the public &

private sector and flexibility & responsiveness in decision making.

Differences between PPP and Privatization

108.

However, before proceeding with a sectoral analysis of PPP, it may perhaps be useful to clearly

understand the key differences between PPP and ‘privatization’. The key differences are as under:-

  • Responsibility: Under privatization the responsibility for delivery and funding a part icular service rests with the private sector. PPP on the other hand, involves full retention of responsibility by the government for providing the service.

  • Ownership: While ownership rights under privatization are sold to the private sector along with associated benefits and costs, PPP may continue to retain the legal ownership of assets by the public sector.

  • Nature of Service: While nature and scope of service under privatization is determined by the private provider, under PPP the nature and scope of service is contractually determined between the two parties.

  • Risk and Reward: Under privatization all the risks inherent in the business rest with the private sector. Under PPP, risks and rewards are shared between the government (public) and the private sector.

Pattern of Funding

109.

The funding pattern and collaboration between the public sector and the private sector could take

any of the following forms:-

    • Public funding with private service delivery and private management

    • Public as well as private funding with private service delivery and private management

    • Public as well as private funding with public/private service delivery and public/private/joint management

    • Private funding with private service delivery and private management.

  • 110.

    These categories have a special appeal as they promise to supplement government resources

through private participation. The Private Finance Initiative (PFI) in the United Kingdom is stated to have been introduced to make the contractor/concessionaire foot the bill of construction, instead of the taxpayer. In lieu of the PFI, the concessionaire is conferred the right to recover his cost of construction and

maintenance (and profit) through charging rent or imposing toll charges for the use of assets so created.

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