Public Private Partnerships (PPPs) are understood as different kinds of collaborative arrangements between the private and public sector and involve government and businesses working together to provide services benefiting the people. There has been rapid global economic development over the last 30 years, which required large investments in infrastructure in almost all countries. The governments sought financial alternatives to fund this infrastructure development through procurement models, which would not burden state debt and could provide capital within the government’s limited budget. This led to the emergence of PPPs as financing tools, which are now used worldwide to enable major infrastructure projects. Thus, one of the major effects of industrial development and globalisation has been the reinvention of the relationship between the state and economy due to the transformation of the public-private equation.  It involves delegation of service delivery functions to the private party to tap into efficiency, risk sharing and innovation. 
It ispertinent to note that an increasing number of countries are enshrining PPPs in their respective laws by tailoring the definition to suit their institutional and legal particularities. As there is no singular and widely accepted definition of PPPs. Organisation for Economic Co-operation and Development (OECD) formallydefines PPPs as “long term contractual arrangements between the government and a private partner whereby the latter delivers and funds public services using a capital asset, sharing the associated risks”.
Thedefinition given by the Government of India states that PPPs are a “partnership between a public sector entity (sponsoring authority) and a private sector entity (a legal entity in which 51% or more of equity is with the private partner/s) for the creation and/or management of infrastructure for public purpose for a specified period (concession period) on commercial terms and in which the private partner has been procured through a transparent and open procurement system.”
Other definitions of PPPs are similar, defining it as a “long-term contract between a private party and a government entity, for providing a public asset or service, in which the private party bears significant risk and management responsibility, and remuneration is linked to performance.”
According to UNECE (United Nations Economic Commission for Europe), PPP refers to “innovative methods used by the public sector to contract with the private sector who bring their capital and their ability to deliver projects on time and to budget while the public sector retains the responsibility to provide these services to the public in a way that benefits the public and delivers economic development as an improvement in the quality of life.” The Canadian Council for Public Private Partnership defines PPP as a “co-operative venture between the public and private sectors, built on the expertise of each partner that best meets clearly defined public needs through the appropriate allocation of resources, risks and rewards.”
Thus, every such partnership between such organisations and the public-sector cannot be labelled as PPP. To constitute a PPP, a relationship between three stakeholders, that is, the public authority, the private-sector partner, and members of the public concerned with the service is to be present. Hence, the key feature of a PPP should be a mutuallybeneficial agreement directed toward serving a social purpose. 
2. PPPs in India
Post economic liberalisation in 1991, PPP initiatives started in infrastructure, specifically in the telecom and power sectors.  Private sector investment was considered a significant requirement for the development of infrastructure in the country. 
In the Union Budget of the year 2015-16, the Committee under the chairmanship of Dr. Vijay Kelkar was set up on “Revisiting & Revitalising the Public Private Partnership model of Infrastructure Development”.  The need for PPP contracts to be more focused on service delivery, the need to identify, balance and allocate risks amongst the different stakeholders, efficient utilisation, viability gap funding, careful monitoring of performance, as well as managing the risk, were the recommendations.  Traditionally, providing public services to the population and developing infrastructure for the same has been solely the prerogative function of the government. However, with economic development, increasing population pressure, and urbanisation, the government finds itself lacking in adequately addressing and fulfilling the needs of the public through traditional means of procurement. This has been a cause for various governments, including India, to look towards the private sector to participate and provide capital and support for infrastructure development.
Taking this into consideration, many nations are exploring the possibility of PPP for large scale investments in providing the basic infrastructure to the public. Traditionally, the role of private sector was limited to providing skilled labour under short term contracts, with the delivery of service being the sole responsibility of the public sector. However, a PPP allows the private sector party to assume financial and operational risk in such projects. Nevertheless, PPP projects have not always been successful and face myriad challenges, such as non-availability of capital, contractual disputes and restrictive regulations, like the acquisition of land. In India, the government does not have a good record of regulating PPPs in practice. PPPs in infrastructure development were seriously considered by the government in 2006, particularly in telecom and energy projects through enabling laws. Enabling policies in a few cases like airports were appointed afterwards.
3. Benefits of PPP for Development and Delivery of Infrastructure
There are many drivers and factors for the sustained growth of PPP as a policy across countries and institutions, especially in the infrastructure sector. The important ones are highlighted below:
1. Increased efficiency in delivery of Services
2. Technology and Innovation
3. Increased Availability of Infrastructure Funds
4. Distribution and reduction of Risk
5. Mutual benefits for the Government Body and Private Enterprise
6. Boost to Urban Infrastructure Development
7. Enhancing Public Management
4. Case Studies of Public Private Partnership in Urban Infrastructure Sectors
To examine the performance of public private partnerships in urban infrastructure sectors in India, given below are case studies:
4.1. Water Services: Karnataka
A wave ofprivatisation of many water services happened in the 1990s, mostly in developing countries. Many of these early projects in India were focused on getting significant private investment in bulk water augmentation and industrial cum bulk water supply projects. Failure rates of most of these projects were high because of poor enabling frameworks for private investment, weak financial strength of project proponents, poor project preparation, and opposition to private sector participation. A shift in focus towards distribution services took place in the first half of the 2000s.
In 2003, the Government of Karnataka formulated a policy to achieve continuous water supply in three cities in five different projects/zones. This project was called Karnataka Urban Water Sector Improvement Project (KUWASIP).  Under this policy, a two-year performance-based management contract was awarded to an enterprise called Veoila. The terms of the arrangement were that the enterprise has to manage the implementation of the improvements to the water supply and operate the upgraded system. This project was successful, and the Karnataka government was able to achieve the objective continuity of water supply in all five zones. The success is attributed to certain vital factors like the creation of the Social Intermediation and Communication Strategy, under which baseline surveys were carried out to understand the responses and concerns about the project. Another factor was the creation of water user committees, which helped coordinate local citizen meetings and raise awareness and quell the initial resistance and scepticism around the project.
4.2. Road Infrastructure: Delhi-Noida Bridge Project
“The Delhi Noida was opened for operation in February 2001. It was among the first few projects developed as a PPP project in India under the BOOT (Build, own, operate, transfer) concession model. It consists of one of three bridges across the Yamuna River connecting Noida with Delhi and the only one that is tolled. Popularly known as the DND Flyway, the bridge is 552.5 meters long and includes the approach roads on the Delhi and Noida ends. This project is often presented as a path-breaking project which proved that private capital could be used for providing public infrastructure services in India. It, too, dealt with multiple authorities and a fragile political environment but was completed within budget and ahead of schedule.”
4.3. Healthcare Services
Adoption of PPP to finance urban health infrastructure has happened over the last two decades in many countries. The PPP model was used to build hospitals in the United Kingdom for the National Health Service.  The Indian healthcare system is plagued with the problem of inadequate expenditure, with only a small share of 1.4 per cent of GDP being allocated by the government. Theproposed solution to bridge the funding gap is PPP. It also faces the crucial challenge of raising the service quality and ensuring equitable access to people.  PPP models are needed for the combined effort of public and private sectors, thereby establishing an effective and efficient urban primary health care delivery system to ensure availability and affordability by increasing healthcare access to the people. Several states namely, West Bengal, Maharashtra and Bihar, have outsourced urban healthcare services to the private sector by contracting through PPP models. In Karnataka, PPP policy for primary health care called the Aarogya Bandhu scheme was introduced but was prematurely terminated by the state government in 2016, followingcomplaints of noncompliance with rules, misuse of funds, etc.
5. Implementation of PPP: Analysis of International Experiences
In Canada, the evolution of PPPs occurred in two waves. The first wave happened in 1990–2000 and the second wave in 2000 till present.  The first PPP infrastructure project in Canada is generally known to be the 1997 construction of the Confederation Bridge across the Northumberland Strait. A decade later, the federal government created ‘PPP Canada’, a body that screens proposed infrastructure projects and invests in successful tenders through its ‘P3 Canada Fund.’ Projects have been undertaken across the nation from west to east, from a green hydroelectric project in British Columbia to a water treatment plant in New Brunswick.  PPPs in Canada have received notable criticism around the issues of accountability, higher costs, loss of democratic control over public services and the user fee rates of some projects. Discrepancies in the project, level of public interest, labour relations, autonomy and accountability, savings and performance are grounds for criticism as well. The question raised is how conflicting values and operations of the independent public and private sectors affect the ability to achieve desired goals efficiently. The most common contention is how the goal of economic gain in the private sector interacts with the public sector value of the public good.
In China, public private partnerships have been developing since the very late 1980s.  2014 was a landmark year in this development as the Chinese government had issued numerous important documents to encourage private investment in public services and infrastructure. An office dedicated to PPPs was created under the Ministry of Finance in 2014.  The Chinese government gradually assembled various elements required for PPPs to flourish in China. 
There are more than 1,000 PPP projects currently, valued over $100 billion, for providingurban infrastructure services in transport, communication, energy, clean water, wastewater treatment, and such other variety of social services. One line of Beijing’s Metro (Line 4) was developed under the PPP model by the Beijing Municipal Government in an arrangement with the private enterprise China MTR Corporation Ltd.  In China, the key is innovation, in the sense that the private sector offers innovative technology and better management skills in tackling sophisticated issues such as water treatment and elderly care. 
The rate of failure of most of these projects was high due to inadequate enabling frameworks (under fragmented institutions) to facilitate private investment, poor project preparation, weak financial capacity of project proponents and political opposition to private sector participation.  These are regulatory issues, as the sectors are presently completely under the domain of government control through state and district level authorities. The officials are not adequately trained or willing to be cooperative with the executives of the private party. Furthermore, the information about PPPs and standard practices and clauses of the contractual agreements are not available adequately in the public domain. This creates conflicts over risk-sharing, exchange of information, calculation of estimated costs, and assessment of capabilities. These conflicts arise when the private party starts to face losses and does not find assistance from the government and leads to the project being sabotaged and the end result is a loss of public money and public services.
Inadequate preparatory work in relation to the framework for PPP projects, identification of projects, selection of private participants, preparation of strategic plan and project reports, drafting of contracts, and other associated activities will only lead to excessive transaction costs, years of delay in project implementation, inadequate quality, and large contingent liabilities to the Government.
These issues can be classified into below mentioned broadheads for an in-depth analysis.
1. Lack of Transparency and Accountability
The challenges arise due to weak management systems like improper communication and lack of training. The non-availability of data on existing assets creates difficulty in assessing the investment needs and the duration required to improve service and operational efficiencies, which is crucial to the success of public private partnerships.  Hence, the major criticism around PPP is the issue of accountability. There is inadequate information on PPPs in the public domain. It has been observed in past PPP cases that private companies often do not share data in the name of business secrecy. 
2. Profit Motive as opposed to Public Service
The primary aim of PPP as a policy is to provide public infrastructure and services more efficiently as compared to the traditional models. But, service efficiency in the delivery PPP models is lacking. Critics argue that the reason behind such inefficiency of delivery of public service through PPPs is due to the actual aim of the policy, which is to privatise public services for the profits of private entities.  Furthermore, they contend that PPP is a mere ploy by governments for contracting out services; it is difficult to push for privatisation. Hence, PPPs, rather than being a valuable input for the public for social and economic development, are becoming a commodity. In many sectors, crony capitalism and opportunistic behaviour by the firms have become a part of the PPP projects.  This corruption leads to inefficiency and loss of public resources.
3. Institutional Inadequacies
An overly regulated institutional and legal framework with issues such as complexity, fragmentation and lack of accountability results in inefficient implementation of PPP projects. 
Hence, while investment requirements in a PPP project are likely to be significant, it is recognised that investments alone will not be effective unless the institutional issues are simultaneously addressed.
The private partner faces risks due to lacking physical infrastructure. If there is lapse in timely delivery, or the project exceeds cost estimates or has technical defects, the financial burden will be on the private enterprise, as a loss. 
4. Other Challenges
Communication and stakeholder engagement is generally weak and lacking in the projects. Such communication assessment with the public and various stakeholders is key to understanding the concerns and fears around the project, which can then be used for a broader, more responsive communication strategy. Additionally, there is no balanced assessment and treatment of risk-sharing in the PPP projects. This may result in facilitating corrupt dealings, as the private parties control the project and manage it to earn profits and for their own benefit but are not held accountable to the taxpayers, who are contributing to the public funds being used to fund such projects.
7.1. Need for Reform
A mature PPP framework, along with a robust enabling ecosystem, will enable the Government to accomplish, to a considerable extent, its development policy objectives for the growth of the nation. The policy trends already point in this direction as the Central government has been promoting the policy of PPP since the 10th Five-Year Plan and JNNURM. The Delhi State Government, in its 2020 E-vehicles Policy, designates PPP to be the financing source. Various State Governments have made specific institutional arrangements to encourage entrepreneurs to invest in PPP projects and to process and appraise PPP project proposals received by public agencies in the respective States. For instance, Andhra Pradesh and Gujarat have passed laws to promote and regulate PPP projects while some others have established their own rules and regulations and issued related notifications. In some states like Karnataka, special or dedicated cells have been constituted in the Secretariat to deal with PPP policy and project proposals, whereas, in some others like Tamil Nadu, State Infrastructure Corporations undertake most duties and responsibilities regarding the promotion of PPP in those States.
8. Way Forward
Some steps needed for future PPP projects to be successful:
1. Better diagnostics and data collection at the project preparation stage. 
2. Mechanisms in the contract which allow flexibility in resetting the targets or renegotiating funding allocations.
3. Strong monitoring and information sharing, with a reporting mechanism.
Thus, PPP policy requires a framework that benefits all the stakeholders in the arrangement, for the private sector, manageable risk, and reasonable return. For the government, it entails procuring value for public money and adequate public service at an affordable cost. It is also imperative to structure the financing of a PPP in a manner that will help the government efficiently allocate its limited budgetary resources for investments in infrastructure.
Furthermore, to pursue the PPP mode, it is important to determine which PPP model would be suitable for the sector. Then assessments of the sector itself must be made, as there are sector-specific requirements and structures which should be considered for the implementation of PPP to be effective and efficient. Looking at international experience, it can be analysed that India must simplify its procedural requirements and strengthen its institutions to develop contractual relationships and implement PPPs. Government must become aware of the complexity of PPP contracts, and the potential liabilities.
About the Author
Ms. Shiksha Srivastava is a Research Associate at CUTS International (CCIER).
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Preferred Method of Citation
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