Improving PPP strategies for municipal infrastructure

This paper is authored by Ramanath Jha, ORF.

Public-private partnerships (PPPs) have had a long history globally and in India. While the Indian government supports this partnership model, PPPs have experienced little success in delivering municipal infrastructure and services. This is despite the demands of a rapidly growing urban population for local services, which the municipal bodies are often unequipped to deliver. Indeed, in many cities across the world, there is an emerging push for ‘re-municipalisation’, or the return of vital services to local authorities. The experience of these cities could provide valuable lessons to India.

PPP (Handout)

The World Bank defines PPPs as a “mechanism for government to procure and implement public infrastructure and/or services using resources and expertise of the private sector.” The PPP model rests on the acknowledgement of the specific strengths of the two parties—the public and the private sectors—and recognises that the two must share the risks and responsibilities in implementing and providing the intended infrastructure or service. These risks and responsibilities are typically clearly established in a PPP agreement and are backed by a legal and institutional framework and robust governance and monitoring mechanisms. Attracting private investment and involvement in such projects, however, is not an easy task. For the Indian government, the key prerequisite “is to lay down a policy framework that assures a fair return for investors provided they attain reasonable levels of efficiency, and protects the interests of users, especially the poor.”

For decades now, PPPs have been a recommended model for providing public infrastructure and services in many countries, including India. This is primarily because the PPP model has introduced innovation, greater investment and efficiency, and lower costs. Examples are PPPs for the water sector in Chengdu, Chonqing, and Yunnan in China, for municipal solid waste management in Sunyani, Ghana, and for road development in India’s northeast. In recent years, certain negative aspects of the model have surfaced in many countries, particularly in municipal services. These include cost and time overruns, deficits in service delivery, and tariff hikes.

This brief assesses the evolution and advantages of the PPP model globally and in India, as well as the current criticisms and consequent calls for re-municipalisation. This concept is also known as ‘in-sourcing’ or ‘de-privatisation’, and is understood as the return of vital municipal services to the municipality and the provision of such services by the local governance body rather than the private sector.

This paper can be accessed here.

This paper is authored by Ramanath Jha, ORF.