Objectives of PPP
Types and approaches for PPP
Broad roles and responsibilities
Encouraging PPP under JNURM
Key determinants for PPP
Case study - Alandur municipality
A Public Private Partnership is an arrangement
between a public (government) entity & a private
(non-government) entity by which services that are
the responsibility of/and have traditionally been
delivered by the public entity are now to be
provided by the private entity under a set of terms
and conditions that are defined at the outset
Accountability to users - still remains with government
PPP is not privatization or disinvestment
PPP is not about borrowing money from the private sector
PPP is more about creating a structure In which greater
value for money is achieved for services through private
sector innovation and management skills delivering
significant improvement in service efficiency levels
This means that the public sector no longer builds roads, it
purchases miles of maintained highway no longer builds
prisons, it buys custodial services
no longer operates ports but provides port services through
world class operators
No longer builds power plants but purchases power
Sourcing of capital to augment existing schemes or implement
Introducing greater technical, operational and
Introducing new technology.
Reducing public subsidies and redirecting them to
Making the sector more responsive to the customers
Objectives of PPP
A contractual relationships between public and private
sectors in infrastructure developments.
A cooperative venture between the public and private
sectors, built on the expertise of each partner.
To meet clearly defined public needs through the
appropriate allocation of resources, risks and rewards.
Reduces costs, increases construction and operation
efficiencies, and improves service quality.
Utilizes private sector knowledge, expertise and
1. Growth of Public Debt
2. accounting fallacies to distinguish between recurrent
and capital expenditure.
3. Traditional funding sources could not keep pace with
growing Infrastructure needs.
4. Increase in demand for public services.
Fiscal reasons - Inadequacy of resources – leveraging on
Lower government funding
Optimal transfer of risks – to the entity best suited to
manage the risks
Design, Financing, Construction, Operations and Maintenance – all
are commercially understood and manageable
Impact - time overrun, cost overruns, change of scope, defective
designs, leakage of revenues, high maintenance costs
Transfer of responsibilities – efficiency gain
Appropriate technology, innovative design solutions, project
management, better collection practices, life cycle costing
Goal Attract private investments for
Need Lack of Budgetary Resources
Need to improve efficiency in service
PPP approach Private Sector contribution for:
- Financial investments
- Best Management practices
- Efficiency in service delivery
- Efficient use of capital resources
Public Sector contribution limited to:
Providing institutional commitment to
Project Development & Selection of
Viability gap funding (VGF)
Build-Own Operate (BOO): A private entity constructs and operates
a facility for performing public services without transferring ownership of the facility
to the public sector. Legal title to the facility remains with the private sector entity.
Build-Operate Transfer (BOT): The private partner builds a
facility to the specifications agreed to by the public agency, then operates the facility
for a specified time period under a contract or franchise agreement with the agency,
and finally transfers the facility to the public agency at the end of the specified period
Buy-Build-Operate (BBO): The government sells the asset to the
private sector entity which then makes the improvements necessary to operate the
facility in a more cost-effective manner.
Design-Build-Operate (DBO): In a DBO project, a single contract
is awarded for the design, construction and operation of a public facility with title to
the facility remaining with the public sector.
Build-Develop-Operate (BDO): Under these partnership
arrangements, the private party leases or buys an existing facility from a public
agency, invests its own capital to renovate, modernizes or expands the facility, and
then operates it under a contract with the government. A number of municipal
transit facilities are operated under this type of arrangement.
Providing Project Site/ Assets
Supporting Infrastructure and Utilities
Specific Obligations (e.g. dredging)
Designing, Engineering, Financing
Construction/ augmentation / up gradation
Operation and Maintenance
Payment and other obligations
Transfer of assets at expiry of concession period
In exchange the concessionaire has the right to receive revenue
tolls or annuity or any other mechanism
Local-Self Governments and PPP
Local governments may consider partnerships with the private sector when any of
the following circumstances exist:
Opportunities to foster economic development;
Involvement of a private partner would allow the service or project to be
implemented sooner than if only the local government were involved;
Project or service provides an opportunity for innovation;
Private partner would enhance the quality or level of service from that which
the local government could provide on its own;
Opportunity for competition among prospective private partners;
Support from the users of the service for the involvement of a private partner;
Service can be measured and priced easily.
Service or project can be recovered through the implementation of user fees;
Track record of partnerships between local government and the private sector
Project cannot be provided with the available financial resources or expertise
of the local government.
Source: Report of the PPP sub-Group on Social Sector, Planning
Encouraging PPP under JNNURM
Adequate Demand for the services/goods
Political commitment to the project
Administrative framework and readiness to meet
Partnership of Public (Government) with Private Sector
rather than owner-contractor relationship
Provision of information required to take informed
decision to reduce risks and uncertainty
Technical, Environmental, Social, Financial, Legal aspects
Bankability of project and project documents
Ability to create a ‘shelf of projects
Project development requires funds and continuous
Strengthening the capabilities of the mandated agency
to create experiential learning
Standardized processes for Viability support for
projects not viable on stand alone basis
No need to reinvent the wheel every time, learn from
Debate has shifted from financing of infrastructure
projects to creation of a shelf of projects.
Name of the Municipality : Alandur
Grade of the Municipality : Special Grade
Population (2001 Census) : 1.46 lakhs
Ultimate Population expected in 2030 : 3.00 lakhs
Extent : 19.5 Sq.km
Total Wards : 42 no's
No of House Holds : 34600
Per Capita Sewerage Contribution : 80 lpcd
Underground Sewerage Scheme Under Public
Private Partnership Mode - Alandur municipality
Road Length - 137 km
Sewer Length - 137 km
Pump House - 1 No
Number Of Manholes - 5,650 No's
House Service Connections - 23,700 No's
STP -BOT basis (2 Units with capacity of 12 MLD each)
(Phase I - Unit Completed and Phase II to be taken up)
Activated Sludge Process with Extended Aeration.
Treated effluent is discharged into Buckingham canal
SEWER LINE COMPRISING OF :
Estimated Cost :- Rs. 7 Cr
BOT operator’s investment :- Rs.7 Cr
Rate per MLD :- Rs 3,772
Name of the BOT operator :- M/s IVRCL Infra Structures &
Projects Ltd Hyderabad
Technology Adopted :- Activated Sludge Process with
Extended Aeration System.
Concession Period :- 14 years.
Payment to the operator is based on the sewage quantity
received in MLD & rate as per the agreement
Demand Driven project Uniqueness of the scheme is “By the
people- For the People”
The demand from the public for the necessity of the Under
Ground Sewerage System ,on par with Chennai city paved the
way for the public contribution
Good leadership that addressed this demand through
credible financing for the project
Alandur Under Ground Sewerage Scheme is an example of
good governance by using alternative institutional arrangements to
finance a sewerage project.
The First Under Ground Sewerage Scheme project on BOT
Basis under PPP Mode in INDIA.
STP component was provided with the Investment of BOT
Municipal Chairman/Councilors/team of officials have
the ward level meeting with the local NGOs/Welfare Associations
etc to convince the public for mobilization of funds through
public contributions and also the importance of Under Ground
Transparent process of maintaining the public contribution
Involvement of beneficiaries at all stages and Timely completion
of the project.
First sewerage scheme in India with public private
participation. Each household paying Rs.5000 for the
First BOT for STP Contractor constructed the STP -
operation and maintenance of the Sewage Treatment Plant
is for a period of 14 years.
This STP has been given under BOT basis.
*Payment will be made by Municipality for the sewage
treated at agreed rate.