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Making Public Private Partnerships (ppp) Work In Water Governance

Congress: 2015
Author(s): Sonia Sethi (Mumbai, India)


Keyword(s): Sub-theme 16: Public and private sector management,
AbstractINTRODUCTION As enumerated in the title, the focus of the paper is on identifying Critical Variables and interventions that can make PPPs work in the otherwise daunting but potentially significant collaborative projects in the urban water supply sector with special reference to India. Academicians and practitioners agree on the potential of private sector in delivering both quality and quantity in the water supply sector. It is the 'How' that needs research. Building the capacities and efficiencies of the policy makers and implementers in bringing the required professionalism while balancing the interests of all stakeholders will provide a much needed relief to this burning academic and empirical need. The problem of identifying appropriate Public Private Partnership contracts and models for urban water supply projects is addressed in this paper. METHODOLOGY Qualitative Research is chosen as the most appropriate method for my Research Paper. Therefore, the data collection is predominantly Indirect through Secondary sources like books, academic journals, reports, electronic media etc. Observation is Non participant. Data collection is in the form of the Case Study Method. After analyzing the existing literature on the subject, data is collected on certain urban sector water supply schemes at various levels of execution in India that have been attempted under the PPP Model. RESULTS AND DISCUSSION The appropriateness of certain contractual arrangements for the water sector PPPs is subject to understanding that contracting problems in this sector vis a vis other infrastructure sectors are different.Assets in this sector are long lived with long payback periods and virtually no alternate uses . The fact that water supply is institutionally fragmented along the Central, State, Municipal Governments and para statal boards compounds the contractual problems along with the limited capacities of Urban Local Bodies especially municipalities in handling complex PPP contracts. Vested interests and politicians leveraging on anti-privatization sentiment create an aura of "hydro politics". The urban water sector is plagued by the overwhelming failure of projects and the factors for success can be categorized as External interventions and Internal efficiencies. This paper focuses more on the latter. In India, the analysis of the Bidding framework for PPP Projects in water supply reveals three types of contracts: O&M-short term-period of 5 to 10 years, EPC+O&M-medium term-period of 5 to 15 years, PPP-long term-period of 20 to 30 years. Technical Evaluation criteria for developers normally includes parameters like : Billing and collection, Management of system/project, Distribution system and Credentials in executing projects of comparable size having similar project components, such as water treatment. Financial proposal, is based on : Grant support requested from government agencies in the form of Annuity to be paid by government agency to private developer firm or Revenue sharing with government agency. In case of projects having stand-alone viability where revenues from project may be divided into fixed and variable components, the fixed fee component includes User charges in case of collection of tariff by the developer & Annual license fee, the variable fee may be based on meeting specific service parameters. Technology (mainly for treatment) may be a criterion for differentiation of bidders for projects such as desalination, water treatment and water reuse. As far as typical project financing is concerned: - Municipal infrastructure financing has not been able to attract private capital to the extent envisaged except in funding residual component of municipal share in government of India sponsored projects. CONCLUSION Peculiar features of the PPPs in water sector that emerge from the above analysis include the finding that the critical risk sharing framework needs more research and innovative skills. Contract drafting and management is often times the key factor in defining success and failure of PPP projects. Skill development and capacity building at all levels of the implementing agencies is glaringly missing. Lack of stakeholder support often causes projects to fail and lack of investment of time and skills for project preparation, structuring and risk allocation impact negatively on project success. Private operators failing to live up to their obligations need greater risk mitigation clauses in contracts. Stakeholder engagement i.e. Civic society, interest groups, service providers, political representatives need a major reorientation of mindsets in order to see water as an economic good and not just a social good. While analyzing evaluatives, it is concluded that contract management plays the most vital role among all determinants of success of water sector PPPs. Restructuring of the Water and Sanitation departments into Boards or Corporate entities leads to more efficient water management. As regards forms of PPP contracts, an incremental approach starting from service and management contracts and then to the more ambitious models like BOT, BOOT or Divestitures is recommended. In terms of concession periods of contracts rather than plunging into long term (20-25years) contracts in the first instance, it is preferable to get the stakeholder buy-in by improving SLBs(Service Level Benchmarks) through smaller contract periods and then move to longer concession contracts. .The recommendations from this paper are expected to provide at least partial solutions to this very complex area of academic and professional research. Note: The Author is an officer of the Indian Administrative Service. The views expressed in this paper are purely personal and based entirely on information available in the public domain.
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