ROLE OF PUBLIC AND PRIVATE PARTNERSHIPS IN

RURAL INFRASTRUCTURE IN INDIA

DEFINING PPPS

The primary features of a PPP are that it is a contractual arrangement between a public and a
private entity

It includes a certain degree of transfer of risk to the private entity with the benefit of
remuneration.

It has an emphasis on meeting a social need or fulfilling a development project which is

intended for the public good.

This also implies that the private sector will operate and manage the project for a specified
period of time. PPPs can be on the basis of Build-Own-Transfer/Build-Own-Operate-Transfer
(BOOT) or Design-Build-Finance-Operate (DBFO) basis.
 PREFERENCE OF PPP MODEL IN INDIA

BOT (Built-OperateTransfer) Modified design- build (Turnkey Performance based management

model contracts) maintenance contract.
• Used for two-thirds of the total • • Contracts yield time and cost
PPP projects in India saving benefits; also enable • Suitable for sectors (water
• User-fee based BOT model: efficient risk sharing and supply, sanitation, solid waste
Widely used in medium- to improve quality management and road
large-scale projects, especially in maintenance) constrained by the
energy and transport (road, availability of economic
ports and airports) resources to improve efficiency
• Annuity-based BOT model:
Commonly used in
sectors/projects not meant for
cost recovery by levying a fee
on sectors such as health and
education
WHY PPP MODEL?

The PPP model serves as a mechanism for the government to carry out the essential activities of
development, especially rural development through infrastructure construction.

While at the same time minimizing the risks and heavy drain on government budgets.

The private sector can invest heavily as it has the resources to do so, and since these projects are for
social good, the government plays a role in providing incentives for the private sector to invest, while at
the same time ensuring that it is in a position to supervise and regulate the project.

As part of the incentives, the government has also resorted to viability gap funding for private entities
who take up development projects, especially in rural areas.

This means that the government funds a part of the project so as to incentivize it for the private entity
to find it attractive enough to take up.
RURAL INFRASTRUCTURE IN INDIA

Under the Bharat Nirman plan, the Government of India is focusing on rural development and building of
infrastructure in irrigation, rural housing and water supply, rural electrification and telecommunication connectivity.

The government is laying emphasis on building a road network across the country that ensures connectivity
throughout the nation and matches up to global standards.

Also on the government agenda is building bridges, telecom networks and towers, electricity grids and other
developmental infrastructure in rural areas.

NABARD had set up a Rural Infrastructure Development Fund (RIDF) in 1995-96 created out of the shortfall of
commercial banks in lending to agricultural/priority sectors, with the primary aim of providing low cost funds to
governments to undertake infrastructure development projects in rural areas.

Since the setting up of this fund, NABARD has allowed the initiation of the PPP model to access these funds for
infrastructure development projects in irrigation, housing, water supply, rural electrification and construction of roads
and bridges.
IN DOING SO, NABARD HAS ENSURED THE FOLLOWING BENEFITS:-

Less pressure on state governments’ budget for developmental infrastructure

Ensures higher level of service and quality

Alleviates cost and time constraints

Increases private sector participation and contribution to economic growth and

development

Creating a sense of ownership among private sector players

PRIVATE SECTOR PARTICIPATION IN INFRASTRUCTURE
DEVELOPMENT IN INDIA

There are 758 PPP projects with a total value of Rs. 383,332.1 crore that have been given government
approval.

In the 10th plan, the Government of India has estimated 320 billion dollars for PPP funding.

However, data given by the government shows that in recent years, almost 70% of PPP projects taken in India
have been in the road transport sector.

This highlights how the government is considering the national highway and road network grid as high
priority and is focusing on developing it at par with global standards
PPP FINANCING

During 1995 to 2007, around 68% of the PPP was finance by senior debt, with 25% equity, 3%
subordinated debt and 4% of viability gap funding by the government.

In the last few years, the percentage of senior debt has increased. One reason for this is that
commercial banks have become more comfortable with the PPP model.

Hence acquiring project financing has become easier.

BENEFITS OF PPP MODEL IN RURAL INFRASTRUCTURE

According to the Government’s National PPP Policy 2011, the government has laid emphasis on the
fact that PPPs would help in achieving broad based and sustainable economic growth.

KEY BENEFITS :-

Employment of private sector resources to fund rural development projects would ensure that the
quality of these projects are at par with global standards, while guaranteeing the best technology,
expertise and skills are available. Public sector institutions rarely have access to such resources and
expertise to fulfill these targets.

By giving incentives such as viability gap funding, government will ensure that private sector has
enough incentive to undertake these projects. This means the focus will shift inward and development
of rural and remote areas will take place. All this will ensure India progresses
Continued…….

The private sector is known for being efficient. Hence it is certain that problems like delayed
decision-making, functioning of day-to-day operations, etc will not arise. Private sector companies
treat these as their usual corporate plans and projects that they undertake, and execute them in a
smooth, efficient manner.

It bridges the gap between public and private, rural and urban. Not just do these projects help bring
the best of both worlds – public and private – together, but are also ensuring that the level of
economic development in the urban and rural areas occur simultaneously
CONCLUSION

To achieve the overall development goals, the government has recognized the importance of PPPs as a
mechanism for speedy and efficient fulfillment of its development plan.

Especially in rural areas, where much remains to be done, by incentivizing projects for the private
sector to pour money and resources into, the government has ensured that its rural sector does not
lag behind.

Also, with institutions like NABARD and commercial banks recognizing the importance of PPP projects
in rural infrastructure, and coming out with services specific to PPP financing.

Hence PPP has come of age in the Indian economy and can be profitably harnessed to reinforce India’s
position on the world map.
EXAMPLES:-
Project Golden Ray PPP between the Government of Rajasthan and MIL which aims at improving economic
self-sufficiency of tribal maize farmers by enhancing maize yields and incomes in five districts; Banswara, Dungarpur,
Udaipur, Pratapgarh and Sirohi.

e-Choupal, (run by ITC, a private sector entity) shows how mutual cooperation between ITC, rural
entrepreneurs, state agricultural universities and the Indian government's extension machinery has served to
bolster the farmer's expertise and day-to-day awareness of what needs to be done to cope with myriad
agricultural needs.

Project Management Agency (PMA): Small Farmer’s Agri-business Consortium (SFAC), an organization
promoted by Ministry of Agriculture, Govt. of India has appointed AFC as a Project Management Agency for
Publicity and Awareness Building Plan to support Venture Capital Assistance Scheme (VCAS) during XII Five Year
Plan(2012-2017).

To promote organic farming, AFC India Limited has been given the opportunity to implement the organic
farming project named as “Adoption and Certification of Organic Management System with online Traceability for
Facilitation Domestic Retail Chains and Export in Gujarat, Chhattisgarh, Orissa and Haryana”