PPP Model of Infrastructure Development   

Infrastructure development is a pre-condition to achieve broad based and inclusive growth on sustained basis. The XII Five Year Plan (2012-2017) has an ambitious target of infrastructure investment at 1 trillion US dollars. Given the huge requirement of funds and limited availability of public resources, it becomes necessary to explore new avenues of funding infrastructure development.

One such avenue is the use of PPP which has been recognized globally. PPP or the Public Private Partnership involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. There are various models in PPP like Design-Build (DB), Operation & Maintenance Contract (O&M), Build-Own-Operate-Transfer (BOOT), Build-Own-Operate (BOO) etc.

 Features of PPP Model 

  • It bridges the gap between demand and supply of funds for creation of infrastructure projects.
  • It provides much needed expertise, operational competency and managerial efficiency of the private sector.
  • It brings in new and cost effective technology.
  • It puts contractual accountability on the private party to ensure timely and quality infrastructure service to the end users.
  • PPP is  an  “off-balance  sheet”  method  of  financing  the  delivery  of  new  or  refurbished  public sector assets. It is because project borrowing is done by the private sector.

Private sector is dependent upon commercial banks to raise debt for the PPP projects. However, with commercial banks reaching the sectoral exposure limits, and  large  Indian Infrastructure companies being highly leveraged, funding the PPP projects is getting  difficult.

PPPs in infrastructure represent a valuable instrument to speed up infrastructure development in India. India is currently in a win-win situation with large young population that will need good jobs and a huge pool of global savings that can be tapped for building out infrastructure.

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