Authors: Palve Gajanand1, H.S.Chandra N2 and D.Karthik3
1,3,Ph.D. Scholars Division of Agricultural extension, National Dairy Research Institute (N.D.R.I), Karnal, Haryana,India.firstname.lastname@example.org
2Teaching Associate, Agricultural Extension, college of horticulture, DRYSRHU, Anantharajupeta.
Corresponding email: email@example.com
The concept of Public Private Partnerships (PPPs) has emerged as a viable option for infrastructure development especially in the context of developing countries. PPPs are emerging as an innovative policy tool for remedying the lack of enthusiasm in traditional public service delivery. They represent a claim on public resources that needs to be understood and assessed. They are often complex transactions, needing a clear specification of the services to be provided and an understanding of the way risks are allocated between the public and private sector.
In the context of developing countries, the recent increase in PPPs has been attributed to several reasons such as the desire to improve the performance of the public sector by employing innovative operation and maintenance methods; reducing and stabilizing costs of providing services; reinforcing competition; and reducing government budgetary constraints by accessing private capital for infrastructure investments.
Private sector involvement in the delivery of public services is not a new concept; PPPs have been used for over three decades, predating the contracting out Initiatives of 1970’s in the USA. Initially focussing on economic infrastructure, PPPs have evolved to include the procurement of social infrastructure assets and associated non-core services. In Asia, countries like China, Malaysia and Thailand started some projects with private participation in mid 1980s in one sector or so, but later on in the 1990s most of the countries in the region involved private sector in the provision of one or more of the infrastructure facilities.
Indian economy is growing at a very fast pace and it has a dynamic and robust financial system. A stable policy environment is ensured by its democratic status and its independent institutions guarantee the rule of law. This highly diversified economy has shown rapid growth and remarkable resilience since 1991, when economic reforms were initiated with the progressive opening of the economy to international trade and investment.
The most significant criteria for a continued growth rate of an economy is the provision of a quality infrastructure. According to the Planning Commission, an approximation of 8 percent of the Gross Domestic Product needs to be invested.
This would help in acquiring a prospective economy as stated in the 11th Five Year Plan. Fund investment of over US $ 494 billion has been conceived of according to the 11th Five Year Plan with effective from 2007 to 2012. The investment sectors under consideration are inclusive of telecommunications, electric power, transport, road, rail, air, water supply as well as irrigation.
In order to meet such demands, various Public Private Partnerships or PPPs are being promoted for implementation of infrastructure projects. PPP is often described as a private business investment where two parties comprising government as well as a private sector undertaking form a partnership. The deficit can be overcome by ensuring much more private capital investment. Expert guidance is the only way out for enabling efficiency through subsequent reduction in cost.
Governments embarking on PPP programs have often developed new policy, legal and institutional frameworks to provide the required organizational and individual capacities. These go beyond that needed to originate and financially close PPP deals, as they must also ensure that these deals are affordable to users and the public sector and provide ex-post evaluation of the success of PPPs in meeting their objectives. This framework needs to be in place in India to ensure a robust and successful PPPs program.
Evolution of Public Private Partnerships (PPP):
Evolution of PPP at International level:
Private sector involvement in the delivery of public services is not a new concept; PPPs have been used for over three decades, predating the contracting out initiatives of 1970s in the USA.
Initially focussing on economic infrastructure, PPPs have evolved to include the procurement of social infrastructure assets and associated non-core services. PPPs have extended to housing, health, energy, water and waste treatment. PPP policy has also evolved globally as public sectors develop the necessary skill base to procure infrastructure by way of PPP, including the capacity to create and maintain a regulatory framework. The private sector has also become increasingly innovative in several experienced countries, thereby adding significant value to public procurement.
The UK has been a modern instigator of this wave of private sector involvement, with the introduction of the Private Finance Initiative. PFIs have been used to develop and deliver all manner of infrastructure and services. The growing use of PFIs has inspired governments worldwide to adopt PPP arrangements. The Australian government has used PPPs to deliver several social infrastructure projects; Ireland has used them for transport infrastructure; in the Netherlands, social housing and urban regeneration programs have been delivered through PPP arrangements; India is investing heavily in highways through PPPs; Japan has many new PPPs in the pipeline; in Canada, many of the new infrastructure are designed, built and operated by the private sector; the USA is a pioneer with contracting out and has started experimenting with other forms of PPPs; emerging democracies from central Europe are also following suit.
During the past two decades, PPPs have become the main route for delivering public services in both developed and developing countries. Between 1985 and 2004, there was a total of 2096 PPP projects worldwide with a total capital value of nearly US$ 887 billion. Countries worldwide with PPP experience include Australia, Germany, Hungary, Italy, Japan, Korea, Spain, the USA, and the UK. Among these countries, the UK is widely viewed as the one with the most extensive PPP (or PFI, which is the equivalent term used in the UK) experiences. For instance, during 2003 and 2004, the UK was the country with the largest PPP investments. Although PPPs have been implemented in many countries, they are not applied equally to all infrastructure sectors. In most countries, PPP projects focus on transportation projects such as roads, bridges, tunnels, railroads, and airports. However, the use of PPPs has been expanded across various sectors in recent years. For example, in Korea, PPPs are used in the development of schools, hospitals, and public housing; in the U.S., PPPs are found in sectors such as prisons and water supply and wastewater treatment.
In developing countries, contracting out was introduced in the mid 1980s during the first wave of governmental privatisation of state enterprises, under structural adjustment programs. Policies were adopted to address the perceived lack of managerial capacity in government, as well as the need to stop the continued dependence of state enterprises on state subsidies.
In Africa, between 1990 and 2004, approximately 14% of public sector infrastructure was provided through PPP, the most common sectors being water, energy and transport.
The PPP trend is global, accelerating and encompassing a broad range of infrastructure sectors. Applying PPPs in social infrastructure sectors has to some extent reduced the concentration of PPP projects at the central government level. Increasing number of local authorities are engaging in PPP arrangements to procure much needed local infrastructure.
India is among those countries which attracted a major chunk of private investment in the region. In the period under consideration (1990-2007), 306 projects worth of US $ 96130 million reached financial closure. 97 of these projects were in the energy sector, 34 in the telecom, 166 in the transport and only 9 in the water and sewerage sector. Although in terms of total projects telecom was at number three but in terms of investment it attracted almost 45% of total investment followed by the energy sector which attracted 35 percent of the total investment. While in the transport sector 166 projects attracted only 19.7 percent of the total investment. In terms of project type, green-field again takes the lead as 182 projects were initiated in this category. In fact, in 2006, India has had the success of attracting more private investment in infrastructure than any other developing country (Harris, 2008).
The main characteristics of a PPP
- Lifecycle approach (integration of the value chain);
- Generation of efficiency gains through the appropriate assignment of functions;
- Real risk transfer with balanced risk allocation;
- Creation of incentive structures and leveraging of innovation potential through result-oriented performance description and remuneration;
- Use of private expertise and capital;
- Long-term relationships on a partnership basis and, in particular, governed by contractual provisions.
- To increase the financing available for infrastructure by making use of private sector investment resources
- To improve value for money in infrastructure projects by creating incentives for best-practice design, timely completion, and efficient operation by sharing project risk with the private sector
- To encourage innovation in the provision of infrastructure
- To improve the sustainability of infrastructure and infrastructure service
- To improve accountability in public expenditure
a. Efficiency: competition and reduction in public funding, leading to significant reduction in costs
b. Flexibility: government and clients have a choice of service providers
c. Accountability: contractual relationships provide transparent criteria and levels of service
KEY ISSUES IN PRIVATE SECTOR PARTICIPATION IN AGRICULTURAL EXTENSION SERVICE
- Confusion in multiplicity of service providers
2. Credibility of information sources
Credibility comes through as an important consideration from the point of view of clients. The fact that extension services are provided by the private sector, even when it is funded by government, is a positive feature. This may be more related to clients’ everyday experience in other aspects of life. Credibility can also be compromised by commercial interests. But if farmers perceive a government policy which is against their interest, they are likely to be wary of government funded extension services and particularly those delivered by government agencies.
3. Conflict of interests
Where a service provider is delivering advice on a commercial or semi-commercial basis to client and at the same time fulfilling a public interest role, there is a potential conflict of interest. A decision that is in the best business interest of a farmer does not necessarily optimize social returns to the community as a whole. In the end, it is the farmer who trades one off against the other, in the decision he makes within the prevailing regulatory parameters. The intensity of potential conflict varies with the institution arrangements. Where the client is receiving commercial and public interest advice from two or more different providers, there is no conflict. Where different sections or staff members of the same organization are offering the two types of advice, the conflict is minimized to the extent that clients recognize their different remits. At an organizational level, potential conflicts are minimized by transparent recording of advisory inputs against specific contracts with individual clients and with government. What is clear however is that the credibility of advisers in the eyes of clients is based on perceived expertise, independence and knowledge of the local area and farming systems. This, in the end may determine whether the clients see conflict of interest as a real issue. It is likely that conflicts of interest are more significant consideration in the minds of competitors for government contracts rather than in the minds of clients. Careful drafting of contracts for delivery of publicly funded services can help to minimize the effect of conflicts of interest.
Potentials of PPP
One of the great potentials of PPP lies in human resource development and training. Under HRD/ training, success has been achieved through PPP in seed technology, DNA fingerprinting, quarantine /plant protection, artificial insemination, feed compounding and supplementation, eco-friendly technology for hatchery management, polyculture technology for carps, etc. More and more areas of mutual interest are to be identified and pursued. Another area of great potential include apex trial of varieties, testing of equipment etc. Such activities will build in much needed confidence, credibility and may lead to business promotion of both partners. In view of the changing market context, specialized research in agreed areas particularly covering entire value-chain, sustainable rural livelihood options etc. will be immensely helpful. Similarly, development of new molecules of chemicals, improvement of quality of produce like carpet-wool, reduction of aflatoxin in groundnut, etc., setting-up pilot plants for processing of produce, establishment of technology incubation centres, identification/establishment of referral laboratories and certification facilities should receive attention. The other potential areas of PPP include organizing periodic open field days and interactive meets, joint project proposal preparation for funding from different donors, providing easy access to facilities in public and private sector institutions, and sponsoring joint studies on adoption and impact of technologies.
ACCELERATED PROGRESS UNDER PPP: SOME SUGGESTIONS
PPP is a reality and a compulsion. Achieving fast progress is dependent on certain requirements. They include, a high-level national policy statement that unequivocally promotes PPP in agricultural research, developing national policy and guidelines for PPP, devolution of powers, freedom, flexibility with accountability in public sector institutions, more studies and analyses of problems, prospects, mechanisms etc. of PPP within the NARS and other science organizations, sponsoring fellowships to PG students of public research institutions by private sectors, need-based mobility of staff between public and private sectors, creation of apex technology transfer and commercialization unit at the ICAR for guidance, policy-analysis, regulation and policy communication, following principles of PPP, namely, identifying partner, understanding partner, identifying priorities, understanding common goal and ensuring communication among partners, bringing in organization and management reforms including organizing extensive trainings to contribute to build-up of positive mindset, efficient work-culture, response style and time and incentives and meet every year regularly to take stock and outline steps for moving forward.
PPP is going to stay with us. But certain problems relating to trust, credibility, work-culture, clear-cut business rules and legal framework, are to be immediately addressed if fast progress is to be achieved. Strong realization on both the sides to come together and work together will help in overcoming these problems. Regular meetings and clear communication between them will hasten the pace of progress under the PPP
The sustainability of private sector participants in extension service delivery requires a new orientation among staff. Staffs who deliver a service need to have appropriate expertise, knowledge and skills if hey are to be effective and remain credible in the eyes of clients. Trends towards commercialization of public services, demand-driven processes, and the search for locally adapted solutions and the need fro negotiation within and between groups for collective decision-making require a considerable shift of mind-set and a much wider range of knowledge and skills than commanded by earlier generations of agricultural advisers. Private sector extension service providers may need to invest heavily in training and reorientation.
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