Explain how private public partnership agreements, in longer gestation infrastructure projects, can transfer unsuitable liabilities to the future. What arrangements need to be put in place to ensure that successive generations' capacities are not compromised?
Published: January 29, 2015
PPP or public private partnerships refer to collaboration between the government and the private sector to meet the infrastructural and other needs of today. In India, PPP agreements are particularly common in infrastructure projects. Governments of developing countries like India face many constraints such as lack of technology, adequate financial resources, qualified personnel etc, so at times it becomes necessary to rope in the private sector to help the government perform its functions. PPP is an instance of such a partnership. PPP agreements like BOT (Build-Operate-Transfer) envisage a scenario wherein the government cannot bear the liabilities and chooses to transfer it to the future. The government is unable to compensate the private party for building infrastructure like roads etc., and transfers the liabilities to future users in a BOT. In BOT, the private party collects toll charges from the users of the road till it finally realises the amount agreed upon in the PPP agreement. The long gestation and capital intensive nature of the infrastructure projects necessitate such an arrangement.
Efforts can be made to protect the capacities of future generations by limiting the duration for which private parties are allowed to hold and operate public assets. Usage of other arrangements of PPP that envisage quick transfer of public assets to the government can also help limit the after effects.
Model Questions Category: 077 - Infrastructure Ports Roads Airports Railways