Unit 3

Public-Private Partnerships(PPP) in Infrastructure

Public-Private Partnerships(PPP)
Characteristics of PPP
Roles and Responsibilities of Parties to PPP
 Advantages of PPP

Concerns of PPP
PPP Model 1- Service Contracts
O&M Model
Lease
BOT Model
• A build-operate-transfer (BOT) contract refers to the initial concession by a public entity such as a local government
to a private firm to build and operate the project. After a set time frame, say, two or three decades, project control is
returned to the public entity
• It is a conventional public-private partnership (PPP) model in which a private entity is granted the rights and
responsibilities to design, finance, construct, operate, and maintain a specific project or facility for a defined period
after which it transfers back to the public sector/Govt.
• The typical lifecycle of a BOT contract involves three phases:
✓ Build: The private party(concessionaire) is responsible for financing, designing, and constructing the infrastructure
project along with the operational risks associated with the project during the contract period. This phase
usually includes obtaining the necessary permits and approvals
✓ Operate: After the construction is completed, the concessionaire operates and maintains the facility for a specified
duration. This can involve providing services, managing operations, and generating revenue from the facility (e.g.,
tolls, fees, or user charges)
✓ Transfer: At the end of the contract period, the ownership and control of the facility are transferred back to the
government or public authority(the original owner). The transfer is often accompanied by a predetermined valuation
or compensation mechanism
• The private company gains revenue during the concession period, while the government benefits from infrastructure
development without upfront investment
• BOT is particularly well-suited for greenfield projects (new projects without prior work) and large-scale, capital-
intensive projects
 Types of BOT Models
• There are different BOT models based on the level of investment, ownership control, risk sharing, technical
collaboration, duration, financing, etc.
• Commonly adopted models of PPPs include-
✓ Build-Operate-Transfer (BOT)- This model involves a private company building a public infrastructure project,
operating it for a certain period, and then transferring it back to the government. Example- The national highway
projects contracted out by NHAI
✓ Build-Own-Operate (BOO)- In this model, ownership of the newly built facility will rest with the private party. On
mutually agreed terms and conditions, the public sector partner agrees to ‘purchase’ the goods and services
produced by the project
✓ BOOT- In this variant of BOT, after the negotiated period of time, the project is transferred to the government or
to the private operator. BOOT model is used for the development of highways and ports
✓ Build-Operate-Lease-Transfer (BOLT/BLT)- In this approach, Govt. gives a concession to a private entity to build a
facility(and possibly design it as well), own the facility, lease the facility to the public sector and then at the end
of the lease period transfer the ownership of the facility to the government
✓ TOT model (Toll Operate Transfer)- This model involves a private company building and operating a toll road or
bridge. After a certain period, the project is transferred back to the government, but the private company is
allowed to collect tolls for a specified time
✓ Design-Build-Operate-Transfer (DBFOT)- This model involves a private company designing, building, financing,
and operating a public infrastructure project. After a certain period, the project is transferred back to the
government
✓ DBFO model (Design Build Finance Operate)- In this model, the entire responsibility for the design, construction,
finance, and operation of the project for the period of concession lies with the private party
✓ Lease-Develop-Operate (LDO)- In this type of investment model either the government or the public sector entity
retains ownership of the newly created infrastructure facility and receives payments in terms of a lease agreement
with the private promoter. It is mostly followed in the development of airport facilities
✓ Operate-Maintain-Transfer (OMT)- Under the OMT model, a private sector entity is responsible for operating and
maintaining a public service or infrastructure project for a specified period, and then transfers the ownership of the
project to the public sector entity at the end of the concession period
✓ OMDA model (Operation Management Development Agreement): This model involves a private company
operating and managing a public infrastructure project. The private company does not own the project, but it is
responsible for its day-to-day operations. Example- Delhi and Mumbai airports, Jawaharlal Nehru Stadium, Delhi.
Airports Authority of India and JVC have entered into an Operation, Management, and Development Agreement,
whereby they have agreed upon the terms and conditions upon which the JVC shall operate, finance and manage
the Airport
 PPP Model 2- Hybrid Annuity Model(HAM)
• HAM is a mix of Engineering, Procurement
and Construction (EPC) and BOT formats
DBL- Dilip Buildcon Limited
SPV- A special purpose vehicle (SPV) is a separate legal entity created by an organization to serve a specific
purpose or activity. SPVs have their own assets, liabilities, and legal status. They are often used to isolate
financial risk and protect parent companies from potential liabilities
HAM is a hybrid- a mix of the EPC (engineering, procurement and construction) and BOT (build, operate,
transfer) models. HAM combines EPC (40 percent) and BOT-Annuity (60 percent). It provides a better financial
mechanism for road development. It is a good trade-off, spreading the risk between developers and the
Government
 PPP Model 3- Toll, Operate and transfer(TOT) Model

The government identified 75 national highway projects, totaling 4,500 km, for implementation under the TOT model
• The Toll Operate Transfer (TOT) model facilitates private investment in national highway projects. The key
components of this model are-
✓ Project Monetization: Under the TOT model, public-funded national highway projects that are operational for >
two years become eligible for monetization. The decision to monetize a project is based on its toll revenue
potential and overall performance
✓ Bidding Process: The monetization process involves a competitive bidding system where developers and
investors (concessionaires) bid for the right to collect and appropriate toll fees for a predetermined concession
period(30 years)
✓ Concessionaire Obligations: Upon winning the bid, the concessionaire is required to make an upfront lump sum
payment to NHAI. The concessionaire assumes the responsibility for the operation and maintenance (O&M) of
the highway stretch for the entire concession period
✓ Transparent Procurement Process: The appointment of concessionaires is conducted through a transparent
and uniform procurement process, adhering to a pre-defined and approved implementation framework
Benefits of the TOT Model
✓ Private Investment Stimulus- The TOT model attracts private investors and developers, injecting much-needed
capital into the highway sector. Private participation reduces the burden on public finances and promotes a
collaborative approach to infrastructure development
✓ Infrastructure Development Acceleration- By monetizing operational projects, the TOT model expedites the
new infrastructure development, allowing funds to be reinvested in the sector
✓ Risk Mitigation: The transfer of toll collection and appropriation rights to concessionaires helps mitigate
operational and revenue risks for NHAI, allowing the authority to focus on planning and executing new projects
✓ Long-term Sustainability- 30-year concession period ensures long-term sustainability of the projects, providing
a stable environment for concessionaires to recover their investments and contribute to ongoing maintenance
BOT Annuity Model

GMR Tuni Anakapalli Expressways Private Ltd

• The BOT Annuity model is a Public-Private Partnership (‘PPP’) model for infrastructure projects, especially
road projects. Under BOT annuity, a developer/Concessionaire builds the highway, operates it for a
specified duration, and transfers it back to the government
• The government starts annuity payments to the Concessionaire after the launch of the commercial
operation of the project. Annuity payments are usually made half-annually. The national highway projects
contracted out by the National Highway Authority of India (‘NHAI‘) under the PPP model are a major
example of the BOT model
PPP Model 4- Design, Build, Finance, Operate and Transfer(DBFOT)
DBFOT Model
• A contractual arrangement whereby the concessionaire is given the responsibility of designing, building, financing
and operating the facility before transferring the Project to the Govt. after the expiry of the specified period
• The concessionaire operates the facility over a fixed term(typically 25 years) during which they are allowed to
charge the users appropriate tolls, fees, rentals and charges as incorporated in the contract to enable the recovery
of investment in the Project
• Ownership- The public sector retains ownership and investment in the project
• Payment- The private sector may be paid by the government agency or by fees collected from the project's end
users
• Concession fee- The concessionaire, pays an annual fee as a percentage of the project's annual revenue
Example-
✓ Development of Circular shape Automatic/Robotic type Multi level car parking, including roof top restaurant,
Commercial units, Drive in restaurant, Children’s park and Bus parking bay at Siruseri in OMR, Chennai
✓ The Indian Ministry of Railways (MoR) uses the DBFOT model to develop railway projects
o Land acquisitions and approval- MoR is responsible for procuring the land required to carry out the project. The
Concessionaire is granted a license to use the land. MoR is also responsible for procuring applicable permits
relating to environmental protection and site conservation. The Concessionaire has responsibility for procuring
most of the regulatory permits required for the project
o Revenue Sharing- MoR pays a User Fee to the Concessionaire amounting to 50% of the revenue collected from
freight operations on the rail system. The remaining 50% is retained by MoR. MoR further provides a minimum
revenue guarantee to the Concessionaire (if actual revenue drops below the applicable benchmark) and profit
sharing applies if revenue exceeds agreed benchmarks. The freight tariff to be charged to third party users is
agreed in the Concession Agreement
Example of DBOOT

(Gangavaram Port)
DBOOT
• A project delivery mechanism in which a government entity grants to a private sector party the right to finance,
design, construct, own, and operate a project for a specified number of years
• This structure is very similar to the build-operate-transfer (BOT) structure, except that the private sector party
owns the asset during the term of the agreement
• The goal of the private party is to recover the costs of its investment, operations, and maintenance, and also
make a profit from the project
• While the private party manages the contract, it generates profit by charging fees from the users of the project,
and it has the project as an asset
• The DBOOT structure is often used to build power stations, water treatment facilities, and sewage facilities
• While the risk is of the private party, this risk is offset by various government incentives, funding, tax breaks,
and any other benefits that the regulatory body sees fit to grant
Examples of DBOOT

Bharuch Enviro
Infrastructure Limited-
United Phosphorus Ltd
Managing Municipal waste

Under the Jawaharlal Nehru National Urban Renewal Mission scheme,

the project was eligible for a grant worth 70% of the estimated project
cost (50% from Govt. of India and 20% from Govt. of Tamil Nadu)
 PPP Model 5- Design, Build, Finance, Own and Operate(DBFOO)
• In this model, the entire responsibility for the design, construction, finance, and operation of the project for the
period of concession lies with the private party

Debt service is the money required to pay the principal and interest on an outstanding debt for a particular period of time
 Class Assignment 5 marks

Case Study- Mobilizing Private Funding of the National Highways

Q1. Describe the implementation Strategy of the PPP Project-Mobilizing funding of the National Highways

Q2. What were the successful components of the Project ?

Q3. Discuss the main Issues of the Project.

BOT vs BOOT
• BOT is a contractual relationship between the government and private firms in which the latter
builds and operates the project before transferring it to the former. However, in BOOT, the private
firms own the infrastructure until the end of the contract period, unlike BOT

BOT vs EPC
• BOT is a project delivery model in public-private partnerships where private companies build,
finance, and operate an infrastructure project for a specific period before transferring it to the
government
• Engineering, Procurement, and Construction (EPC) is a contract model commonly used in
construction projects. In EPC, a single contractor is responsible for the entire project, including
design, procurement of materials, and construction
 Public/Citizen participation in Infrastructure planning
Citizen participation
• Citizen Participation is the active involvement of citizens in the legislative decision-making process allowing
them to contribute to decisions that may have an impact on their lives
• It is the process of giving priority to local people's perspective in identifying and analyzing their problems
and opportunities and improving the situation through their self-mobilization
• Citizens living in a community have the right to be involved in planning its future. Citizens live with the
consequential impact of new developments, therefore involving them at each stage of the project from
concept to development is crucial
• Creating an institutional environment that encourages citizen participation in government necessitates a
bilateral process that includes the following steps-
✓ Citizens should be vigilant, proactive and responsible
✓ The government should be transparent, responsive and receptive
• MyGov aims to establish a link between Government and Citizens towards meeting the goal of good
governance in the country
Importance and Contribution of Citizen Participation
• In addition to meeting citizens’ expectations that their views should be considered in public
decisions, citizen participation can contribute to
✓ Reducing the isolation of the planner from the public
✓ Generating a spirit of cooperation and trust
✓ Providing opportunities to disseminate information and ideas on public issues
✓ Identifying additional dimensions of inquiry and research
✓ Assisting in identifying alternative solutions
✓ Providing legitimacy to the planning effort and political credibility of the agency
✓ Increasing public support for planning decisions
✓ Making the planning process and planners more effective
✓ More inclusive and representative decision-making
✓ Providing opportunities for citizens to communicate their legitimate interests
✓ Providing Accountable and transparent system
✓ Providing strong collective intelligence that provides a better analysis of potential impacts and a
broader range of considerations throughout the legislative process for overall higher-quality outcomes
✓ Avoiding protracted conflicts and costly delays
• There are varying levels of participation as represented in the
Citizen Participation Ladder. Some levels of participation may be
more effective than others at different stages of the legislative
process, and the objective of a citizen participation strategy
should not necessarily be to empower citizens in every situation
attitude
Bhagidari: Citizens’ Participation in Governance – Delhi:
• The Citizens’ Partnership in Governance, or “Bhagidari,” is a tool for facilitating people’s
engagement in Govt. The project began in January 2000 and grew into a movement over the next
eight years
• Approximately 2000 citizen groups have become ‘Bhagidars’ in governance after attending many
Bhagidari workshops
• The “Bhagidari” has been successful in assisting public utility departments with maintenance and
service upgrades in addition to resolving their day-to-day problems
Examples-
✓ The ‘Say no to plastic bags’ and ‘No crackers on Diwali’ campaigns were both successful
✓ Switching on/off of streetlights by Residents Welfare Associations
Public participation
• Public participation refers to involving various groups of stakeholders in a process of participation- individuals or
citizens’ initiatives as well as representatives of lobbies that represent the concerns of the group they belong to
• Public participation means meaningful and effective involvement of stakeholders in decision making to get
public to be more supportive
• Over the past years, the construction or development of infrastructure projects is one of the most important in
terms of public participation and this issue has become a necessity in many government structures according to
their laws
Fields of Application for Participation
Purpose and Level of Participation
• Public participation contributes to better decisions because decision-makers have complete
information in the form of additional facts, values, and perspectives obtained through public input and
has an impact on the decision process
• The goal of public participation is to ensure that people who are affected by or interested in a project
or initiative have plenty of opportunities to be informed, communicate their opinions, influence
decision-making, and shape outcomes
• The other purposes of public participation are the principles of fairness and equity, the right of citizens
to be informed and to express their views on governmental decisions, the need to represent the
interests of disadvantaged and powerless groups and capture the insights of citizens
• It has been found in practice that citizens participate more actively at a local level as they are directly
affected by decisions at that level and even at city level, more people participate and the nature of
their objections and suggestions is generally about local concerns, rather than expressions about city-
or regional-level issues
• Public involvement will sometimes help increase support for the project, which can improve the
chances of getting plans approved and implemented
 Stages of Participation
• There may indeed be contexts where public empowerment is highly desirable, but there are others in which a
consultative role is more appropriate for members of the public than full ‘citizen control’’. In planning such
differentiation would be useful
How Public Participation Works How Public Participation Succeeds
 Role of NGO’s in Infrastructure Implementation

• NGOs(Non-Governmental Organizations) are voluntary organizations, that work toward a social cause and
social justice. They have assumed a significant space in civil society and assist the government to achieve its
development
• NGOs and their impact play a very vital role in the development activities of a country. NGOs work on
socioeconomic and infrastructure development as well as rural development
• NGOs with the support given by the government have been accelerating their development activities by
taking up specific issues like women’s rights, child labor, rural development, environmental issues, etc.
• NGOs include charitable and religious associations that mobilize private funds for development and
promote community organization. Citizen groups that raise awareness and influence policy are also NGOs
• They are an important link between people at the grassroots, civil society, and the state. They have
primarily humanitarian or cooperative rather than commercial objectives
• They are involved in the implementation of governmental programs and also in the process of formulation
of public policies, and the enforcement of social legislation
• NGOs play an important role in encouraging sustainable community development emphasizing a balance
between environmental problems and development, and enhancing local social relations. Sustainable
communities meet the economic needs of their people, enhance and protect the environment, and
encourage more humanitarian communities
• Local, national & regional NGOs have emerged as major players & partners in development activities in the
region
NGOs play a significant role in infrastructure development in India, including:
• Building infrastructure: NGOs can purchase land and construct schools, hospitals, wells, and public toilets
• Community-driven projects: NGOs can undertake projects that address critical needs like transportation,
education, healthcare, and sanitation
• Participatory planning: NGOs can involve the community in planning to ensure that projects meet their
needs and priorities
• Mobilizing resources: NGOs can help mobilize local resources for development
• Mediation: NGOs can act as a link between people and the government
• NGOs can also play other roles in development, including: Research and development, Advocacy,
Dissemination of information, Training, and Facilitating dialogue
Activities undertaken by NGOs
• The role of NGOs is to focus on all issues concerning human rights, social, environmental, and advocacy. They
work to promote and improve the social and political conditions of the society on a broad scale
• Important roles of NGOs towards community development are
(1) Development and operation of infrastructure
(2) Supporting innovation, demonstration, and pilot projects
(3) Facilitating communication- NGOs can facilitate communication upward from people to the government and
downward from the government to the people
(4) Building capacity- NGOs provide free education, Technical assistance and training programs, and other
information
(5) Research, monitoring, and evaluation- NGOs act as a watchdog or independent auditor of Government and
corporate performance and accountability. NGO ensures that the government is responsive and solving the
problems of the citizens. NGO is also authorized to give suggestions and encourage improvement and
flexibility in the government’s policymaking by giving their own research teams and expertise
(6) Social safety-valve role- NGO becomes an advocate to societal problems and needs. They play a significant
role in lending voice to the poor and needy
(7) Advocacy and raising awareness- NGO is a voice for every individual. Researching, analyzing, and informing
the public about the prevalent issues and organizing citizen action by conducting media campaigns
(8) Conflict resolution- NGO works as a mediator and facilitator in conflict resolution and creates an environment
of trust and confidence
(9) Service delivery- It provides the delivery of essential humanitarian and other social services
• At the community level, they are on the front line in
✓ Catalyzing and/or facilitating the active participation of communities in infrastructure development- The
involvement of local people should be ensured by mobilization camps, street plays, awareness camps,
sensitization workshops, and also by involving the local people as volunteers. The local persons or the
stakeholders can bring about meaningful change
✓ Assisting in the acquisition of basic needs and amenities
✓ Articulating the communities’ problems & needs and bringing these to the attention of policymakers
✓ Government agencies implement programmes that are planned at the macro level for the benefit of a large
section of the population. The NGOs work in isolated pockets, on issues touching the people, at the grassroots
✓ Helping citizens voice their aspirations, concerns, and alternatives for consideration
✓ Defending the environmental and developmental rights of communities
✓ Promoting sustainable socio-economic development
✓ Dealing with sustainable development concerns- NGO keeps an eye on any compromise happening in the present
needs and destruction of natural resources to achieve selfish goals. They come up with control measures to
prevent an overutilization of natural resources leading to environmental threats
Advantages of NGO
Government-led and Internet-empowered citizen participation in China's policymaking:
A case study of the Shanghai 2035 Master Plan
• Urban planning is an essential public policy in China that involves multiple interests and directly affects the
well-being of a large proportion of the population who live in and around the urban area
• Digitalization has expanded the scope of citizen participation. This study presents new evidence by examining
the process, participants, policy agenda, and sentiments of public opinions from the government-led and
Internet-empowered citizen participation regarding the 2017–2035 Shanghai Master Plan
• Four findings are reported based on the in-depth case study with text and sentiment analysis-
✓ First, the government-led model provides institutionalized opportunities for citizen engagement throughout
the policy process, while the Internet-empowered citizen participation is characterized by contingency & ad hoc
✓ Second, the government-led model remains elite-dominated, while the Internet empowers a wider scope of
stakeholders with an open and popularized participation platform
✓ Third, the public opinion from the Internet-empowered model often goes beyond or even against the pre-
defined official principles and goals. In contrast, the civic discussion in the government-led model influences
policy by changing the sequence of policy agenda or providing focus within the official setting
✓ Fourth, citizens, especially the experts, are more likely to give positive feedback in the government-led model
than in the Internet-empowered approach
• These findings confirm and identify the remaining institutional bias that hinders inclusive policymaking in the
Internet age. Practically, it indicates that the central government could facilitate inclusive policymaking at the
local level by reducing the institutional bias of the government-led approach and utilizing text and sentiment
analysis to urge the local government's response to Internet-empowered public opinion