PUBLIC-PRIVATE

PARTNERSHIP
PPP, P3, or P3
INTRODUCTION

A legally binding contract between the government and a private business organisation
to provide public assets and public services for the benefit of the general public is
known as a Public-private Partnership (PPP, 3P, or P3). PPP is a partnership
between private and public enterprises regarding infrastructure and other services. For
instance, The Chennai Port in partnership with P&O, and the Jawaharlal Nehru Port
Trust (JNPT) in Mumbai are two examples of port construction projects under the PPP
model.
Project objective

The objective of PPP is to combine the best

capabilities available from the public and
private sectors. In addition to social
responsibility, environmental awareness, and
local expertise, government contributions to the
partnership include funds for investment and the
transfer of assets
FEATURES
The following are the features of the PPP Model:
1. Partners in PPP:
Government Entities, such as Ministries, Government Departments,
Municipalities, or State-owned Enterprises, are the public partners in PPP.
The private partners can be local or worldwide businesses or investors who
have the required financial or technological expertise for the project.
2. Role of Public Sector in PPP:
The public sector plays a crucial role and assures that social commitments
are satisfied, industry changes are implemented, and public investment
goals are successfully realised.
3. Role of Private Sector in PPP:
The private sector’s role in the partnership is to use its functional, task-
management, and innovative experience to run the business effectively.
4. Cost of Using Service:
In some cases of PPP, the users of the services pay the costs of utilising them rather
than the taxpayers, and the government may cover wholly or partly the costs of
providing the services.
5. Provision of Capital Subsidy:
The government may issue a capital subsidy in the form of a one-time grant to make
projects aimed at providing public goods in the infrastructure sector more attractive to
the private sector. In some cases, the government may offer a revenue subsidy, such as
tax rebates or a guarantee of yearly income.
6. Pertaining to High-Priority Projects and Public Welfare:
PPP is suitable for high-priority projects, such as the infrastructure sector. PPP is
utilised in government initiatives aimed at promoting public welfare.
7. Revenue Sharing:
The revenue from PPP is divided into an agreed ratio between the government and
private firms.
8. Issues with PPP:
The primary issue with the PPP project is that the public sector takes the majority of
the income risk, and private investors receive a rate of return that is higher than the
rate on government bonds.
 ADVANTAGES
1. Sharing of Project Risks: A PPP project’s structure
distributes project risks to the organisations best
suited to manage them.
2. Increased Efficiency: Involvement of the private
sector improves project execution efficiency and
reduces downtime and expense.
3. Innovation: PPP helps in the introduction of
innovative design and construction techniques.
4. Better Viability: The project’s viability is improved
by the involvement of experienced and trustworthy
sponsors and commercial lenders.
LIMITATIONS

Infrastructure or services delivered could be more expensive;

PPP project public sector payments obligations postponed for the later periods can negatively reflect

future public sector fiscal indicators;

PPP service procurement procedure is longer and more costly in comparison with traditional public

procurement;

PPP project agreements are long-term, complicated and comparatively inflexible because of impossibility

to envisage and evaluate all particular events that could influence the future activity.