PPP & Privatisation : Key Differences

 PPPP & Privatisation : Key Differences

1. Responsibility :

Privatisation -Private sector's 

PPP -Full  retention of responsibility by government 


2. Ownership:

Privatisation -ownership rights sold to private sector along with associated benefits and costs. 

PPP -Government may continue to retain the legal ownership of assets by the public sector 


3. Nature of service: 

Privatisation - Nature and scope of service is determined by private provider. 

PPP  -Contractually determined between the 2 parties 


4. Risk and Rewards : 

Privatisation -All risks inherent in the bussiness rest with the private sector 

PPP -Risks and rewards are shared between the government and the private sector. 


Advantages 

1. Operational Gains: Ensuring that one delivers better or more services for the same price (efficiency gains) or making saving to release money for investment elsewhere .


2.Strategic Clarity:  Partnership contracts enhance accountability by classifying responsibilities and focusing on the key deliverable of a service. The Managerial efficiency of a ministry can benefit significantly as existing financial, human and management resources can be refocused on strategic functions. 


3.Cost Effectiveness : Since selection of Service Provider depends on competition project is more cost effective than before .


4.Higher Productivity : By linking payments to performance, productivity gains may be expected within the project. 


5. Accelerated Delivery : Contracts generally have incentive and penalty clauses vis-a-vis implementation of capital projects which leads to accelerated delivery of projects. 


6.Clear Customer Focus : Shift in focus from service inputs to outputs create the scope for innovation in service delivery and enhances customer satisfaction.  

7. Enhanced Social Service : Social services require a great deal of commitment than sheer professionalism.  In such cases it is community/ voluntary organisation who alone can provide the requisite relief  (e. g. large number of voluntary organisation in India working in municipal services ).

8. Recovery of User Changes: Innovative decisions can be taken with greater flexibility on account of decentralization. Wherever possibilities of recovering user charges exist these can be imposed in harmony with local conditions. 



Risks

●Conflict between various players 

●Inadequate checks monitoring can hamper public intersects 

●Lack of transparency in procedures 

●Fragmentation of health services 

●Cost overruns 

●Monopolistic prices

●User charges are against concept of democracy 

●Lack or poor quality of post-ante performance evaluation 

●Lack of compilation and dissemination of info on PPPs 

●PPPs perceived as only a source of capital 


Some examples 

●The British Government has used PPPs to finance the building of Schools, hospitals for defence contracts and specific capital projects such as the Channel Tunnel Rail Link the National Air Traffic Services and improvements to the London Underground. 

●Social services in Germany and the Netherlands are provided mostly through PPP by non-profit agencies that have a monopoly in these services. 

●PFI (Private Financial Initiative) in UK. India has also used it for development of infrastructure public economic sector and power sector. 

●PPP cell has been created in Ministry of Finance in India. DBFO (Design, build, finance and Operate) division was created in the road sector. 

●Used by bilateral donor or developmental agencies e. s. USAID (United States Agency for International Development ). 

●Gujarat, Andhra Pradesh and Punjab have developed specialized institutions and legislation. They have constituted an agency and passed Acts to promote private sector participation in infrastructure projects across sectors  (Gujarat Insfrastructure Development Board the AP Infrastructure Authority and the Punjab Infrastructure category of States including Karnataka, Rajasthan, Uttaranchal and West Bengal have developed cross - sector facilitation entities but have not passed comprehensive legislation. 

●The Rajasthan Project Development Corporation  (PDCOR )a joint venture to facilitate private investment in infrastructure including policy advisory services to the state government and Institutional support to structure and implement PPPs. 

●Third category of States MP , Maharashtra and Tamil Nadu have relied on sectoral and line agencies to develop and implement PPPs.  In Madhya Pradesh for e. g. Initially the MP Works Department and then the specially created MP Road Development Corporation  (MPRDC) act  as the agency for development of road projects on a BOT basis.

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