2. Definition of a PPP
PPPs are an arrangement between the public entity and the private partner for development of infrastructure or delivery of services. Under conventional construction contracts, the private sector bears only the design and construction risk whereas under PPPs, they are likely to bear other risks pertaining to financing, demand, and operations, depending upon the risk sharing mechanism between the public entity and the private partner.
The Department of Economic Affairs, Ministry of Finance, Government of India, has not limited the definition of PPPs to only infrastructure/ provision of related services, making it more exhaustive in scope and application to sectors. It defines PPPs as follows:
"A PPP means an arrangement between Government or statutory entity or Government owned entity on one side and a private sector entity on the other, for the provision of public assets and/or related services for public benefit, through investments being made by and/or management undertaken by the private sector entity for a specified period of time, where there is a substantial risk sharing with the private sector and the private sector receives performance linked payments that conform (or are benchmarked) to specified, pre-determined and measurable performance standards."
Annexure 2 of this PPP Guide for Practitioners lists out definition of PPPs as defined by State Governments and other Countries.
| Description of PPPs In PPPs, the private partner assumes the hitherto traditional role of the public entity - of delivering services to the general public - under conditions that are monitored, independently or by a Government agency, regulated or left to the market, depending on the nature of the services/assets. It is important to note, though, that the ultimate accountability to users for provision of these services continues to remain with the public entity, even if the delivery is by the private partner. For example, the National Highways Authority of India (NHAI) may contract out the responsibility for construction and maintenance of a road to a private party under a Build- Operate and Transfer (BOT) concession. However, the ultimate responsibility to users for providing good quality road services continues to remain with NHAI which needs to ensure that appropriate quality/service standards are maintained. |
The different stages in PPP project development lifecycle are set out in the schematic diagram given below.
The foremost stage in the PPP lifecycle is the project preparation stage which involves identifying the project need. It is followed by the development stage comprising activities such as project feasibility, project structuring, bid documentation and process management. The development stage concludes with identifying a private partner. The private partner is then responsible for the construction, operations and maintenance (O&M) of the project during the construction and O&M period. The last stage is the handover stage which involves handing over of the project facilities from the private partner to the public entity upon expiry of the agreement period.