PUBLIC PRIVATE PARTNERSHIP AND ECONOMIC GROWTH WITH SPECIAL REFERENCE TO INDIA – AN OVERVIEW

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International Journal of Management (IJM)
Volume 7, Issue 3, March-April 2016, pp. 18-26, Article ID: IJM_07_03_003
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PUBLIC PRIVATE PARTNERSHIP AND
ECONOMIC GROWTH WITH SPECIAL
REFERENCE TO INDIA – AN OVERVIEW
Wendrila Biswas
Assistant Professor, School of Management & Social Science,
Haldia Institute of Technology,
Haldia, West Bengal.
ABSTRACT
In this era of globalization, public private partnership acts as an
instrument for meeting the ever increasing demands with the resources as well
as meeting quality with accessibility. In an economy where there is a mix of
daunting challenges and opportunities PPP would definitely lay a solid
foundation for economic growth and development and would help India
become a major player in the global economy. A couple of evidence shows
that PPP has a far reaching significance for rapidly advancing countries. The
reason is that the development in all spheres has become a prime agenda.
PPP is an approach if the government adopts and implement would facilitate
the improvement of public services in a situation where the public sectors are
facing budgetary constraints and again there is a scope of private investments
in varied sectors. It is a PPP that allows an effective utilization of resources
by the government facilitating greater economic activities and enabling more
benefit to the public. In order to drive economic growth it is essential to
welcome PPP with right set of policies that would create economic prosperity
and expansion. The paper tries to highlight this significant factor and shows
that a couple of PPP based projects in varied sector has enormously acted as
a modern mechanism for faster economic growth in India. It was through PPP
based projects that it is possible to increase the volume of investment in public
services and increase level of operational efficiency throughout the length and
breadth of the country. Today PPPs are gaining ground due to skill
development, corporate challenges and exercises, delivery of services and
goods, logistical support in spite of highest complexity thus creating a radical
change in the economic scenario of India, ensuring a better government and a
better society.
Key words: Public Private Partnership (PPP), Economic Growth, Modern
Mechanism

Indirect Tax Revenue - An Assessment Of Cental V/S State Government
Cite this Article: Wendrila Biswas, Public Private Partnership and Economic
Growth with special reference to India – An overview. International Journal
of Management, 7(3), 2016, pp. 18-26.
http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=7&IType=3
1. INTRODUCTION
Financial markets globally have undergone a sea change in the last few decades.
Investment strategies and proforma have significantly become diversified and
complex. With economic liberalization, the process of globalization has opened the
gates of global market where ‘capital’ can be searched for. Again the pace and race of
globalization has given rise to developments both financially and intellectually along
with ever increasing demands from financial and social communities made on state as
a whole. A lot of developmental as well as basic civic services which a government
provides often have to meet acute crisis due to paucity of funds and thereby the state
is always in search for private sector to supplement public investments and provide
public services through a unique partnership referred as ‘Public Private
Partnership’(Datta, Roy & Datta, 2011) or PPP. This partnership essentially is needed
for the purpose of improving efficiency, productivity and quality of services as well as
to bring in the competitiveness that would help reducing the ‘gestation period’ for
providing and setting new facilities and amenities for the general public along with an
expertise management technique. Particularly in India, when the growth rate suddenly
rose to 9%, it was an alarm to the government, that in order to hold to this joyous
position the country need to have more investments in key infrastructure sectors like
power, transport and communication. Then it became the strategy of the government
to invite private investment which could only bring notable success. As time passed,
the state started realizing that for sustaining the pace of socio economic development
the role of PPP have become not only vibrant and intense but has proved to be
successful. Thus PPP’s increasingly became a derivative of privatization movement
and government rethinks (Gosh & Gope, 2011). Thus PPPs with its stupendous
combination of government sector expertise and strength of private sector in terms of
technical competence, innovation, investment and risk taking abilities are uplifting an
economic condition as well as boosting shared prosperity and sustainability.
2. OBJECTIVES OF A PUBLIC PRIVATE PARTNERSHIP
The objectives of a PPP are to increase the availability of services and to do so with
greater efficiency than could be achieved using the traditional public sector approach.
These objectives can be achieved as:
 PPPs allow access to the substantial financial resources of the private sector.
 PPPs enable the public sector to benefit from private sector technical expertise and
efficiency.
 PPPs enable the public sector to transfer project related risks to the private sector.
3. PUBLIC PRIVATE PARTNERSHIP - THE NEED
 Public Private Partnership or PPP provides a way to increase the volume of
investment throughout the country as a whole and increasing the operational
efficiency as well as rendering quality public services.
 PPP initiates the implementation of infrastructure and urban development projects.

Wendrila Biswas
 PPP is in particular need due to inefficiency, overstaffing and low productivity in
govt. services and govt. owned enterprises.
 The projects under PPP go through competitive pricing process which clearly shows
that the cost of public services is ‘bench marked’ against market standards.
 The payments which are made to private sector under PPP projects usually are
determined by how the private sector perform thus creating efficiency and thereby
incentives.
 In these PPP projects, there is cross transfer of ideas, skills, knowledge, knowhow,
expertise which creates an innovative effect as well as advances their efficiency.
 In case of infrastructure sector, govt. may often face not only a challenge but a
difficulty in fulfilling infrastructure demand and its services. PPP comes here to play
the role to increase as well as improve the infrastructure facilities. Thus PPP can
promise a better design, technology, construction, operation and service delivery.
 PPP plays a major tool for creating employment opportunities by developing the
services sector.
 PPP helps to transfer the risk to private sector which can reduce the potential for
government cost overruns from unforeseen circumstances during project development
or service delivery. As per the contracts the services are provided at a foreseeable
cost.
4. FRAMEWORK OF PUBLIC PRIVATE PARTNERSHIP
Source: Maity, Sudarshan, (2011), Development and Public –Private Partnership, ‘The
Management Accountant Journal’, Vol.46, No.3, March
EFFECTIVENESS
 Success in meeting the PPP objectives
 Effectively managing & monitoring the
delivery of the program
 Scalability/replicability
EFFICIENCY
 Return on investment analysis
 Affordability (Public sector support)
 Reduction of economic inequalities
 Developing and implementing a
regulatory mechanism
EQUITY & POLITICAL
CONSIDERATIONS
 Equity (access for poor & rural
populations)
 Political & Trade union resistance
 Contingent on wider public sector
reform
 Monopoly control
 Consumer’s sovereignty protected
SUSTAINABILITY
 Economic returns to the private sector
 Financing risk
 Private sector appetitive and capability
 Local stakeholders buy-in.

Sl No.
Ministry
Sector
Completed Projects
Projects under
implementation
Projects in pipeline Overall status
No. of
projects
Project
cost (Rs.
Crore)
No. of
projects
Project
cost (Rs.
Crore)
No. of
projects
Project
cost (Rs.
Crore)
No. of
projects
Project
cost (Rs.
Crore)
A.
Central Sector
1. National
Highways
75 31404 161 155438 18 25377 254 212219
2. Major Ports 29 12964 29 8561 20 17420 78 38495
3. Railways 4 1561 3 3441 12 58100 19 63102
4. Airports 3 5883 2 25237 15 23692 20 54812
Total (Central
Sector)
111 51812 195 192677 65 124589 371 369078
B State Sector
1. Roads 166 22445 187 65038 200 71614 553 159096
2. Ports 28 33162 18 28411 39 40620 85 102193
3. Urban
infrastructure
179 7568 144 47496 420 257196 743 312259
4. Power 26 36580 121 113491 42 34878 189 184949
5. Railways 0 0 2 1357 0 0 2 1357
6. Airports 0 0 1 141 22 14434 23 14575
7.
Other Sectors 183 9861 126 20371 288 48789 597 79021
Total (States/
U.T sectors)
582 109615 599 276305 1011 467531 2192 853450
Grand Total 693 161427 794 468982 1076 592120 2563 1222529
5. PPP PROJECTS IN CENTRAL & STATES/UTS SECTORS
Source: www.http://planningcommission.gov.in
5.1. PPPs in Railways
Indian Railways is one of the largest networks running across the length and breadth
of the country providing the solid base for transport. In order to meet the freight and
passenger traffic challenges, Indian railways had to go for PPP in order to build,
redevelop, improve and boost the rail infrastructure thus providing smooth and
comfortable transportation. Rail Vikas Nigam was set up in January, 2003 to
supervise the implementation of National Rail Vikas Yojna. A thorough up gradation
and expansion of Indian railways was essentially required as it is through railways
that inclusive growth of economy can take place. For such a purpose Indian Railways
have taken up four projects on PPP mode through SPVs namely, Pipav Rail
Corporation (PRCL), Viramgam Mehesana Private Limited (VMPL), Hassan
Mangalore Rail Development (HMRD) and Kutch Railway Company Limited
(KRCL). The Mumbai Metro which is operated by Mumbai Metro One Pvt. Ltd.
(MMOPL), a PPP between RIL and Mumbai Metropolitan Region Development
Authority (MMDA), the Hyderabad Metro Rail Project, Bangalore High speed rail
project, east west Metro railway project in Kolkata are also being structured on PPP
mode. This year, railway minister, has announced to set up 400 model stations across
the country under PPP mode.
The World Bank and the Dedicated Freight Corridor Corporation (DFCC)
announced in December, 2014 that it had signed a USD 1.1 billion loan agreement

Wendrila Biswas
which will finance the 393 km second phase in Uttar Pradesh, part of the 1800 km
eastern dedicated freight corridor from Ludhiana (Punjab) to Dankuni (near Kolkata),
(the Eastern Corridor). The DFCC is a special purpose vehicle incorporated for the
planning, construction, operation and maintenance of the Eastern Corridor and the
1500 km western dedicated freight corridor from Dadri (near Delhi) to Jawaharlal
Nehru Port (near Mumbai), (the Western Corridor).
5.2. PPPs in Road Transport
Roads are one of the most essential parts of infrastructure connecting industry,
agriculture and market resulting in overall growth of economy. The 12th
five year plan
called for an active participation through PPP as much as possible for betterment of
public services. India’s roadways cover approximately 4.1 million networks
consisting of highways, major district roads, expressways and other roads. The 12th
five year plan called for an active participation through PPP as much as possible for
betterment of public services. The government has realized that an active PPP in
roadways and highway sector can accelerate infrastructure development. PPPs in
states of India have started quite late but still Indian states have adopted the PPP
model in the highway sector. The National Highway Development Programme
(NHDP) have actively sought PPP model. It was in this context that the necessity for
exploring the innovative means of financing the highly capital intensive road transport
and highway project was felt (Sen & Garani, 2011).
5.3. Models of PPP adopted in India
The two models of PPP adopted in India for development of National Highway are
BOT (Toll) and BOT (Annuity).
(a) BOT (Toll) Model:
In the BOT (Toll) model, the Concessionaire recovers his investment by
charging toll from the users of the toll facility. This model reduces the fiscal
burden on the government while also allocating the traffic risk to the
Concessionaire. This is the model used for the most of the projects and can be
regarded as the default model for highway projects.
(b) BOT (Annuity) Model:
Under a BOT Annuity model, the Concessionaire is assured of a minimum
return on his investment in the form of annuity payments. The Concessionaire
does not bear the traffic risk and the government bears the entire risk with
respect to toll income.
(Source: Public Private Partnership in National Highways: Indian Perspective, Discussion
Paper, Gajendra Haldea, Planning Commission, April, 2013)
 The NHDP has been extended to seven phases, from previous two phases.
 Bharat Joro projects (Golden Quadrilateral Projects) for development of 10,000 kms
of roads connecting state capitals with National Highways - launched in collaboration
with private construction firms, both domestic and foreign.

Progress under NHDP
Total Length Completed
Under
Implementation
GQ 5846 5846 0
NS-EW, Phase
I&II
7142 6380 328
Part Connectivity 380 379 1
NHDP Phase III 12109 6540 2883
NHDP Phase IV 13203 1198 3709
NHDP Phase V 6500 2115 1441
NHDP Phase VI 1000 - -
NHDP Phase VII 700 22 19
NHDP Total 46880 22480 8381
Source: National Highway Authority of India (NHAI)
5.4. PPP in Health Care Sector
There has immense change in the healthcare requirements along with the growth of
Indian economy and changing demographics. With ever increasing population in
India, a pressure as well as challenge has been faced by government to provide better
quality service and access to the people of the country. It is quite obvious that
government alone cannot reach out to every corner of the country. Associated efforts
of both public and private healthcare sector can only provide a better healthcare
system in the country. It is the initiative of CII National Committee on Healthcare
which constituted Healthcare subcommittee which brought forward the PPP in Indian
healthcare industry. The government has surely diagnosed the significance of PPP in
healthcare sector as it is of such a partnership that ‘both social objectives of universal
healthcare access and the business objective of running a profitable healthcare
facility’ (Policy paper prepared by CII in collaboration with KPMG) can be achieved.
The following are the key on the basis of which PPP in healthcare is of urgent
requirement:
a) Infrastructure development
b) Management and operations
c) Financing Mechanism
d) Capacity building & training
e) IT Infrastructure
f) Materials management
The following medical projects show the PPP in India:
 Yeshavini Health Scheme in Karnataka – Initiated by Narayana Hrudalaya, a super
specialty heart hospital in Bangalore and by the department of cooperatives of the
Govt. of Karnataka. It is targeted to benefit the poor farmer.

Wendrila Biswas
 Arogya Raksha Scheme – Initiated by Govt. of Andhra Pradesh with New
Assurance Company and private clinics. It provides hospitalization and personal
accident benefits to the people under poverty line.
 Telemedicine initiative by Narayana Hrudayalaya in Karnataka - It was an
initiative by the Govt. of Karnataka, Nrayana Hrudayalaya hospital in Bangalore and
The Indian Space Research Organization that the telemedicine project called
‘Karnataka Integrated Telemedicine & Tele health Project’ (KITTH) came up online.
With connections by satellite, this project functions in the coronary care units of
selected district hospitals that are linked with Narayana Hrudayalaya Hospitals.
 The Uttaranchal Mobile Hospital & Research Centre (UMHRC) - It is a three
way partnership between technology information, forecasting and Assessment
Council (TIFAC), The Govt. of Uttaranchal and the Birla Institute of Scientific
Research (BISR). This partnership was promoted to provide healthcare and diagnostic
facilities to poor and rural people at their doorstep.
 Rajiv Gandhi Super specialty Hospital, Raichur, Karnataka- It is a joint venture
of the Govt. of Karnataka and the Apollo hospitals Group, with financial support
from OPEC. The reason of the hospital is to give a super specialty health care
treatment at a low cost to people living below poverty line.
 Community Health Insurance Scheme in Karnataka – The Karuna Trust in
collaboration with the National Health Insurance Company and the Govt. of
Karnataka has launched a community health insurance scheme in 2001 to improve
access to and utilization of health services to establish insurance coverage for the
outpatient care by the people themselves.
5.5. PPP in Power Sector
The power sector has also showed great achievements with public private
partnerships. PPP in power sector has improved the ground situation and has
produced excellent results. The Ministry of Power (MoP) has developed a framework
even for promoting private sector participation to develop transmission infrastructure.
 Tata Power entered into a 51:49 joint venture company with Power Grid Corporation
of India for 1200 km Tata Transmission project.
 Maithon Power Limited is a joint venture company formed between Tata Power and
Damodar Valley Corporation (DVC) and is executing 1050 (2 X 525) MW Maithon
Right Bank Thermal Power Plant.
 Ultra Mega Power Projects (UMPP) is another PPP project at Mundra being set up by
Tata Power and is progressing well.
 A PPP policy framework is being devised with Coal India Limited to increase coal
production and to reduce dependency on imported coal.
 Hydel stations of Himachal Pradesh Koldam, Tehri Dam, Sewa Li, North Karanpura
500 mw, Kahalgaon, Barh, Unchahar, Dulhasti Tehri Pump Storage 904 mw, Dadri,
Tala (Bhutan), Badarpur and joint project in Haryana – 4870 mw generation projects.
 MOU has been signed with Petronet LNG Ltd. for supply of 7.3 mmscmd gas for the
following new power projects: 350 mw combined cycle Pragati Phase – II gas –
based power station near existing Pragati power station and 100 mw combined cycle
gas turbine Pragti Phase (III) power project at Bawana.
 Many other private sector companies like CESC, KEC International, Lanco
Infrastructure, Kalpataru power are also working with public sector companies for
generation and transmission of power.


6. CONCLUSION
In view of the current state in our economy, it is very important to go for such public
private partnership that would enhance our economic development. Even some
noteworthy evidence shows that more the PPP projects launched in a country higher is
the rate of GDP growth. It is through PPP that key sectors in our economy have
shown improvement and innovation thus contributing immensely to the public
benefit. PPP are becoming private finance initiative where the government avails
advantage of the skills, expertise, ideas and knowledge of private sector management
by giving long term franchises which clearly mention the responsibility and
accountability of private sector partner. History itself has frequently shown that PPP
can improve urban living though collaboration that combine innovative efforts from
the private sector, forward thinking policies from government and support from
nonprofit organization (Witters, Marom & Steinert). Where government today are
operating on razor thin budgets, PPP with its capital, technology and expertise to
finance, develop and manage public sector infrastructure projects can become catalyst
for economic growth. Thus a good deal of examples has shown that PPP s are one of
the greatest solutions for strengthening infrastructure, securing public support and
generating economic gain making it attractive for policy makers.
REFERENCES
[1] Chakrabarti, Ran (2015), ‘PPP in the Rail Sector- Challenges for Modernizing
India’s Rail Network.’
[2] Datta, Roy & Datta (2011), ‘Public Private Partnership and its application in
India’, The Management Accountant journal Vol.46, No.3, March
[3] Ghosh, A. & Gope, A (2011), ‘Public Private Partnership Projects’, The
Management Accountant journal Vol.46, No.3, March
[4] Sen, P. & Garani, P. (2011), ‘Applications of PPP Model in key infrastructure
sectors to stimulate economic growth in India’, The Management Accountant
journal Vol.46, No.3, March
[5] Haldea, G. (2013), ‘Public Private Partnership in National Highways: Indian
Perspective’, International Transport Forum, Discussion paper no: 2013:11
[6] Witters, L., Marom, R. & Steinert, K (2012), ‘The role of public private
partnerships in driving innovation’, The Global Innovation Index, 2012.
[7] Chisa, O. & Kayode, O, Ikeni, N, & Gambo, G (2015), ‘Public Private
Partnership as catalyst for sustainable infrastructural development’, International
Journal of Engineering Science Invention, Vol.2, Issue 2.
[8] A guidebook on Public Private Partnership in Infrastructure- 2011, Economic and
Social Commission for Asia and the Pacific
[9] Ratogi, Anupam (2006), ‘The Infrastructure sector in India, 2005, in 3i network ,
India Infrastructure report 2006: Urban Infrastructure’, Oxford University Press,
New Delhi
[10] Subbarao, P., Kiran, R.S., & Srikanth, G.V. (2011), ‘Building Blocks to
successful public private partnership’ The Management Accountant journal
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accessed on 16-12-2015
[12] http://www.worldbank.org/en/topic/publicprivatepartnerships/overview#1accesse
don18-12-2015

Wendrila Biswas
[13] www.planningcommission.gov.in
[14] http://www.saiindia.gov.in/english/home/Our_Products/Audit_Report/Governme
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[15] http://www.pppinindia.com/sector-power.php accessed on 23-12-2013
[16] https://www.tatapower.com/media-corner/presslease/press-release-24-june-
2011.aspx
[17] www.infrastructure.gov.in
[18] www.pwc.com/india
[19] www.ibef.org

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PUBLIC PRIVATE PARTNERSHIP AND ECONOMIC GROWTH WITH SPECIAL REFERENCE TO INDIA – AN OVERVIEW