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Presentation Public Private Partnership (PPP)

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Public Private Partnership (PPP)

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Presentation Public Private Partnership (PPP)

  1. 1. Public Private Partnership in Urban Water Sector in India Ankit Tulsyan Ipshita Das Khalid Rahman TERI University 20th October 2014
  2. 2. Public Private Partnership: Definition • A Public Private Partnership project means a project based on a contract or concession agreement, between a government or statutory entity on the one side and a private sector company on the other side, for delivering contractual service on payment of user charges. • The concept of PPP should not be confused with other concepts such as Public service(full state responsibility), Privatization(includes sale of assets) and Outsourcing(short term contracts, ex: hiring a security).
  3. 3. Need for a Public Private Partnership • The increasing trend of population pressures in a country alongside various developmental projects taking place for the welfare of state has severally constrained the government’s ability to address public needs through the traditional means. • Other considerations too, like  Increased efficiency in project delivery  Improved operation and management  Access to advanced technology  Need to bring in commercial viability considerations in the provision of urban infrastructure
  4. 4. Types of PPP Supply and Management Contract Manage part or whole of Infra/Service Ownership - State Management Fees in lieu 3 – 5 Years Turnkey Traditional Model/Less Complex Bidding Process of Selection Design & Builds at a Fixed Fee Low Risk and Low Pvt. Investment Lease/Affermage Public Investment with private efficiency Operator run, collect revenue, 8-15 Yr period Lease – fixed fee to the Owner Affermage – fixed fee to the operator Greater commercial risk to the Private operator Concessions Public authority grants the right to build and operate Revenue is linked to performance, 5 to 50 year period High Pvt. InvestmentSeveral Forms – JV/BOOT/BOT. Govt. may do VGF Asset ownership of Govt
  5. 5. Genesis of Public Private Partnership • Public Private Partnerships (PPPs) were introduced in 1992 in the UK by the Conservative government and subsequently expanded across the world. • This was the basis for the first PPP Policy developed in the state of Victoria, Australia. • In India, PPP Model was first followed in the power sector and thereafter expanded to other sector • In case of Urban water supply, the trend was primarily Build Operate Transfer (BOT) with 100 percent private financing but post 2010, the operational contracts are a mix of concession agreements, BOT projects, and management contracts
  6. 6. Overview of PPP in Indian Urban water Sector Source: Trends in Private Sector Participation in the Indian Water Sector: A Critical Review
  7. 7. Reasons for Failure of the Projects Source: Trends in Private Sector Participation in the Indian Water Sector: A Critical Review
  8. 8. Analysis of factors for Success of the Projects Source: Trends in Private Sector Participation in the Indian Water Sector: A Critical Review
  9. 9. International Case Studies Senegal • In early 1990’s only 54% of Senegal’s urban population had access to safe water. • In 1994 Gov created steering committee of the ministers of each Gov agency concerned with WSS • The committee created a state asset-holding company to retain the asset and the right to extract water, and operating company would produce and distribute water. • Considering the need and constraint of the sector the committee decided to give it on a affermage contract • A 10 years affermage contract was signed between Government and Senegalaise des eaus which was formed specially for this purpose with specified term and condition
  10. 10. How PPP Helped Foster Efficient Public Investment in Senegal  Between 1996 and 2003, water production has increased by 18 percent with 81,000 new household connections and 400 standpipes according to the World Bank.  The financial equilibrium achieved in 2003, with average tariff increases not exceeding 3% per year  Water cuts are rare and more of Dakar is connected to a clean water supply than ever before, with careful measures to make sure that poor areas of town are not overlooked.  Service to the poor: Social connections programs (SCPs) have significantly helped expend access of service to the poor  Thus, the key outcomes of the PPP are: 1. More water to more people 2. Better financial heath 3. Positive change in tariff
  11. 11. Key factors for successful implementation • The choice of affermage contact was an innovation. A performance contract has never been used before like this and initially there was a lot of skepticism, but it has proved to be very effective • The contract addressed the need of the Gov and kept the asset in hand • Strong political will and good leadership from the relevant ministry was present. • The operations and maintenance function were clearly defined. • Tariff Adjustments has introduced progressively as improvements are made in coverage and service quality.
  12. 12. International Case Studies Manila (the Philippines) –Past Scenario, before 1997 • Before 1997, the capital’s water supply and distribution was in disarray. • Communal water sources were shared by hundreds of families who had to line up for hours just to get a few pails for the day’s use. • Two-thirds of the water produced was being lost to leaks, poor metering, and illegal connections • Clean and potable water was a luxury which poor families simply did not have, and that others had to acquire at a steep price
  13. 13. International Case Studies Manila (the Philippines) - Post a PPP arrangement in 1997 • Two concessions were awarded in 1997 to cover two contrasting areas • The Ayala-led Manila Water Company took over the East Zone of Metro Manila & the Western concession by the Maynilad, operated by Benpres-Suez under a concession agreement. Winners invested $7 billion to expand and improve the facility • In the Western concession (Maynilad), coverage expanded from 67% to 86 percent. In the Eastern zone (Manila Water), coverage jumped from 26% to 99%. • An estimated 4 million people gained access to piped water in Manila during the period 1997–2006. • Water for poor programme at 1.5$ per month • With the contract the Price has been decreased by 74% in the east zone and 43% in the west zone.
  14. 14. International Case Studies Manila (the Philippines) Source: Public-Private Partnerships for Urban Water Utilities, Marin 2009
  15. 15. Way Forward – for strengthening PPP in Urban Water Sector  Establish sector trend approach rather than current project specific approach  States should follow well established and accepted principles to increase the chance of success for PPPs in water sector  Bureaucracy should be a facilitator and not an impediment  Develop sector regulation for long-term measure:  Develop states implementation and monitoring capacity  Tariff Structure Reforms for full cost recovery approach

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