PPP is public private partnership where a private entity enters into a contract with a government entity to provide public asset or service in which the private party provides its managerial expertise and operational efficiency. Remuneration in this is linked to performance. PPP model was envisioned for infrastructure sector but now it is present in all the sector.
In the recent past PPP model is facing several issues:
- Non availability of capital: Due to the recession period and the global slow down, the twin balance sheet syndrome has erupted. This has lead to paucity of funds.
- Land acquisition and Environment clearance issue. The clearance is a complex issue and sometimes subjected to red tapism.
- PPP model in its nascent stage was a successful affair but now competition is huge. But aggressive bidding and traffic overestimation makes the project economically unfeasible.
- The excessive tolls and burden on tax payer is another issue. The toll remains for perpetuation which not only is a burden on the pockets but it affect free movement of goods.
- Confusion over the contractual agreement like revenue sharing or production sharing model.
Soln: (additional info)
- Setting up an independent regulator
- Frame a national PPP
- Amend PCA to clarify cases of graft and genuine errors in decision making
- Swift dispute resolution mechanism
- Hybrid annuity model
- Viability gap funding