Definition
Public-private partnership is an arrangement by which a government service or private business venture is funded and operated through a partnership between a govt. body and one or more private sector companies. These schemes are sometimes reffered to as PPP or P3.
Concept
The Planning Commission explains it as an approach under which services are delievered by the private sector while the responsibility for providing the services rests with the govt. It further adds that this approach requires the govt. to either enter into a contract with the private player or pay it for the services rendered.
PPP is seen by many as a classic mix incorporating the best of both public and private sectors-high quality services with a guarantee.
Benefits of PPP
- Reduces strain on public money and ensures that no project is put on the backburner for lack of funds. The kind of investment required for huge development works can put enormous pressure on the exchequer;so partnership with the private sector is a wise option.
- Ensures higher productivity as the contract with the private sector is normally perfomance linked and helps ensure high standards . Bureaucratic hassles are minimised and services are delivered with greater efficiency.
- Greater cost effectiveness as contracts are based on competitive bidding. Contributions from both public and private sector facilitate regularly supply of finance without burdening either party.
- Timely delivery of services as it is not just a contractual obligation but the government , which is responssible for delivery of services, can be held accountable.
- Enhanced customer satisfaction,given the greater level of confidence about the efficiency of the private sector with regard to delivery of services. The presence of the public sector helps to allay fears of non-accountability.
- Risks involved are distributed among the partners making the undertaking more feasible.
- Accountability of private sector is ensured as it is the govt. which is responsible for providing the services.
- New markets are created for the private sector, which increases the benefits to the shareholders.
- New taxes can be avoided which would have been otherwise necessary to finance large scale projects. Thus PPPs help spare the common man from additional project-related tax burden.
- Helps reduce migration of talent from the public to the private sector.
