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Public Private Partnership Model

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Last updated date: 21st Jul 2024
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An Overview of the PPP Model

The public-private partnership model is the funding model that is used in economics. When an individual is talking about PPP full form in economics it is a public-private partnership model that is used for all project related to public infrastructure. This infrastructure may vary from airport, power, telecommunications system and similar other things as such. This article is going to provide the readers with a complete overview of the public-private partnership model and its implication on society. Let us start with the basics of the PPP model.

What is the PPP Model?

A public-private partnership model is a form of cooperative arrangement that is made between private and public sectors for a considerable period. The application of this model enables the government and the business to come and work together for a project that caters to the needs of the populace. These projects include water and sewage, transport systems, school, college, hospital and similar other educational institutions. 

This model also includes a wide range of risk allocations, requirement of transparency and also arrangements of funding. It is often referred to as new public management when it comes to the concept and practice of the PPP model in the modern days. This model has also been a controversial subject which gave birth to the debate of privatization. 

Throughout history, the government has implemented this model as a mixed-initiative by public and private organizations. Also, this model has been studied through the vision of contract lens by numerous economists across the world. Let us have a look at the history of public-private partnerships. 

History of The Public Partnership Model

Till now, we have informed you everything about the public-private partnership- from the PPP full form in economics to the definition and implication of the model. Here we are going to discuss the history of the public partnership model. The first study that was theoretically conducted on this subject was one by Oliver Hart. The difference that lies in the older form of services meant for public infrastructure was that the operating stages were bundled. This has led to the reason why private organizations in modern days have strong incentives in the building stage compared to the operating stage. 

This model by Hart has also been extended in several ways. Various externalities have been explored between the building and the operating stages by several authors after Hart. This model has also been understood in five different levels. These levels include the tool of government, wider cultural phenomenon, statement of government policy and similar things as such. Now the risk allocation involved in PPP projects between the two entities as mentioned above is well defined. Also, the private sector entity obtains payments that are linked to performance. For instance, these payments are standardized to pre-determined performance which is measurable by the Public Department. 

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FAQs on Public Private Partnership Model

1. What is meant by PPP?

The PPP model full form is the Public-Private Partnership. This is one of the initiatives that have been implemented by numerous countries across the globe for overall advancement and growth. It is an arrangement which is done by the government entity along with the private sector to create benefits for the public and maximise them. Also, in such an arrangement the private sector takes charge of the management or invests for a particular period. 

2. What are the advantages of public-private partnership?

There are several advantages to be drawn from a public-private partnership which are as follows:

  • Ensures effective public resource management and  acquiring of the required investments into the public sector

  • Timely provision and higher quality of public services

  • The efficiency of this model can minimize government budget deficit and investment. 

3. State about the public-private partnership in India

There are several international and domestic investors which have attracted the state of infrastructures in India due to the potential it reflects. Also, it is important to understand that there is a requirement of a large investment with regards to India’s plan of building world-class infrastructure. This would also help in bridging the gap between both quantity and quality. Keeping such an objective in mind, the government of the country has explored the PPP model in India in its full potential.

Such initiative taken by the government focuses on areas like ports, roads, energies and so on. The understanding of what is PPP model and how it can be implemented to find avenues of opportunities have helped India towards its development. Besides, the government has also taken initiative to implement some regulatory changes in the infrastructure sector to include PPP. 

The infrastructure project of India under the PPP model is extensively growing. However, most PPPs are limited to road development projects. Undoubtedly, this is a sector that has considerable potential to explore. This is one of the reasons why PPS are conducting activities to achieve the maximum amount of benefit through it.