Public Private Partnership
Over the last couple of decades, Public Private Partnership (PPP) has emerged as an effective method to expand and maintain transport infrastructure facilities. As compared to the traditional practice of awarding separate contracts for construction and maintenance, PPP usually involve competitively awarding concessions that combine construction, operation and maintenance over a longer time period, 15 to 20 years. This approach offers several advantages. It provides a strong incentive for the private developers to achieve significant investment as well as operational efficiencies, with a clear focus on minimizing overall costs during the life cycle of the contract.
First, in a well-structured PPP, such efficiencies are usually significant enough to offset the higher cost of intermediating funds through market as compared to direct borrowing.
Second, it ensures that the government authorities envision long-term maintenance while awarding concessions. Lack of maintenance has been the bane of South Asia’s transport infrastructure services.
Lastly, by linking recovery of costs to the quality and level of service – and mostly through user charges – PPP can effectively shift the focus away from mere construction to efficient provision of service.
PPP in South Asia:
India awarded several transport projects on PPP basis including roads, ports and airports. India is seeking to further expand the use of PPP in transport sector. Other countries in the region are keen to harness PPP to improve their infrastructure services and are currently focused on creating appropriate policy frameworks.