8 reasons why the PPP model is important in the economy | Public-private partnership.

Subodh was traveling with his family for a week after studying hard for his exams so, now he wanted to enjoy his holidays with his family in a seaside hotel but they need to travel a long way to reach there,

But the traveling journey road was very irregular as they encountered so dusty and improperly maintained roads. But Subodh had been always curious person so he wanted to know who is responsible for it and they is it that so important road track is in such pity conditions,

After some research, he found out some interesting things about construction that is happening because of one government model of investment which is PPP also termed as a public-private partnership, let us see more about it in detail in the simplest way possible.

What is PPP or public-private partnership?

The PPP is the investment model implemented for larger scale and investment, construction and in this partnership, two parties are involved, the government and the private company.

The big constructions can’t be single-handedly managed by the governments, machinery so they take the help of private machinery for completing some humongous constructions like the transportation networks, parts, convention centers, etc.

What is the need for public-private partnerships with the government?

The government needs to work on different aspects in the country and so they cannot involve them all man powers and machinery into the constitutions inky so they take the help of private partners who will help the government in the financing along with the manpower and technological requirements to the construction works of the government.

What are the types of public-private partnerships?

The PPP model of government and private company ownership is categorized into some identical types. These types are made on the basis of financing between both along with technology contribution, risk sharing, ownership shares of both, and the most important the investment share by both parties for the construction project.

The following are some important types of public-private partnership :

  • Build-Operate-Transfer (BOT),
  • Build-Own-Operate (BOO),
  • Build-own-operate-transfer (BOOT) 
  • Build-Operate-Lease-Transfer (BOLT), 
  • Design-Build-Operate-Transfer (DBFOT), 
  • Lease-Develop-Operate (LDO), 
  • Operate-Maintain-Transfer (OMT), etc.

Let us discuss more all of them in detail in the next paragraphs :

Build-Operate-Transfer (BOT) :

this was the very first partnership model in which the private sector is responsible for financing the project along with taking the responsibility for the completion of the project.

The (NHAI) The national authority of India’s maximum highway road construction is before 2016, using this mode of the public-private partnership model.

Build-Own-Operate (BOO) :

In this mode of partnership the newly built projects are owned by the private entry with the mutual terms to purchase the goods and services from the projects.

For example, the train body, making factory will be made and then owned by any private entity, but the trains will be purchased by the government from that private entity.

 Build-own-operate-transfer (BOOT): 

                                 Under, this way of the public partnership model, the private partner is responsible for all the operations starting from financing to completing all the construction of the project, and then the projects are handed over by the private player to the government after the completion of projects. 

But there is one big catch and that is to operate, so in the operating period, the completed project is owned and maintained by the private players to collect the money out of the construction. This money is collected in the form of taxes or toll charges for roads or entry fees for parks from the people visiting or using the construction for some needs. Once the investment by the investors and complex then they translate the ownership of the project to the governs.

Build-Operate-Lease-Transfer (BOLT):

In this approach, the private entity is given some concessions to the private player during all the stages of construction to complete the construction in a quick and hassle-free manner. 

After the completion of the project, the project is again given to the private plates for lease after some required tax collection is made from the property then it’s finally transferred to the government.

Design-Build-Operate-Transfer (DBFOT):

In this model of PPP, the complete responsibility of construction starting from the design to built is given to the private players by the company and after time when the company has collected all the amount of its investment for the projects is transferred to the government.

Lease-Develop-Operate (LDO):

  This method of PPP model is mostly used for the airport’s constructions in which the newly constructed projects are either owned by the government if the private entity after its completion and the taxes are levied from it and this tax or the payments are taken by the government as the part of lease agreements by the government with the private entity/

Operate-Maintain-Transfer (OMT):

    This mode of PPP model is applied to the projects who are already completed or half completed and which are needed to be completed quickly now so the government priced these provides these projects to the private entity to re brush the projects and to complete it soon and then they can collect the taxes on the project. Once the required taxes are collected, then they can transfer the projects to the government.

What are the problems with the public-private partnership model:

The biggest problem associated with the model is the allocation of finances because the finances for these constructions are very humongous and any company who’s willing to invest into something will think of Quicktime returns from that investment but that isn’t the case most government construction projects.

 Most of the projects are carried with the purpose of welfare only, so instant profitability is very tough or impossible from such projects so very few interested private parties come up to complete such projects or once started such projects complete with very slow rates.

Conclusion :

Governments need to find new ways of innovating in the present public private partnership of completing the construction projects as infrastructure is the backbone of any economy and also for all the citizens of the country.

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