Handout - 4

STUDY MATERIAL – HANDOUT
HANDOUT- 4
ORGANIZATIONS
ORGANIZATIONS
PART-D
TOPICS COVERED
 Structures and Forms of Organization
 Independent Regulatory Commissions
 Headquarter and Field Relationship
 Private-Public Partnership (PPP)
 CASE STUDIES ON PUBLIC PRIVATE
PARTNERSHIPS – WORLD BANK CASE STUDIES
For Feedback, write to synergyias143@gmail.com 1

st
16-A/2, 1 Floor, Ajmal Khan Road, W.E.A. Karol Bagh, New Delhi
Delhi- 05
 011-25744391
25744391  8527697136  8595079231 |www.synergyraftar.com
Structures and Forms of Organization
♦ Departments
♦ Companies
♦ Corporations
♦ Boards and Commissions
Departments
A department is a part of a larger organization with a specific responsibility. It is one of the
oldest forms of structure of organization. And it is most frequently and widely adopted by a number
of countries across the world. The department structure is an integrated structure which don’t
witness any break in the chain of the organization from top level to bottom level. The authorities in
a department flow from superior to subordinates. There is, in fact, a strict sense of superior superior-
subordinate relation. No level in the hierarchy enjoys complete
complete autonomy. This type of organization
structure flowed from principle of specialization to bring better efficiency. The department
structure is found pre-dominantly
dominantly in government organizations.
After the stage of laissez faire and welfarism, the states
states entered into the phase of big state
phenomenon. The state directly took almost all the activities. Meanwhile the market had its own
features, such as competition, profit, flexibilities and risk taking, etc. therefore, the state found it
difficult to address
ess the market requirements. The state was not compatible with the market
requirements. And the department structure was not effective enough to deal with the market
forces. It could not take over the sick and failed market arenas. Besides, the department structure
could not adapt well with new structures, such as joint ventures, collaborations and partnership,
etc. Therefore, there was an urgent need for alternate structures of organization. The state found
solace in structures like companies, corporations,
corporations boards and commissions.
Companies
A company is a legal entity created through executive order. It is registered under the Indian
Companies Act of 1956. (Now amended to New Companies Act, 2013) The Act defines a
government company as one which not less than 51 % of the share capital is held either by the
Central Government or State Government or partly by the Central Government and partly by the
State Government (s). A company may be a private limited company or public limited company. The
management is vested in a Board of Directors. Most of the directors are appointed by the
government. The employees are recruited by the company itself and they are government servants.
A government company is one of the most widely used forms of organization in India. TThe
merit of a government company is that it is an autonomous body. It can manage its affairs. The
structure provides great flexibilities and initiatives. It can make use of managerial skills,
technological knowledge and expertise of the private sectors. It is easy to establish a government
company.
However, a government company has certain limitations. The Board of Directors of a
government company consists of civil servants and officials from the ministry. They may not have
the required technical knowledge and expertise. Though independence and autonomy exist in
paper, the control is largely exercised by the government. The accounts of a government company
need not be audited by the Comptroller and Auditor General of India.

st
Delhi- 05
 011-25744391
Corporations
A corporation is veryy similar to a company with fine changes. It is created under the laws of
a state as a separate legal entity that has privileges and liabilities that are distinct from those of its
members. There are many different forms of corporations. Many corporations are established for
business purposes but public bodies, charities and clubs are often corporations as well.
Corporations take many forms including: statutory corporations, corporations sole, joint joint-stock
companies and co-operatives.
operatives. An important (but not universal)
universal) contemporary feature of a
corporation is limited liability. If a corporation fails, shareholders may lose their investments, and
employees may lose their jobs, but neither will be liable for debts to the corporation’s creditors.
Boards and Commissions
An organization may either be a bureau type or Board and Commission type. The bureau
type of organization is headed by one individual i.e. based on unity of leadership, whereas board
and commission type of organization is headed by plural body. Though
Though boards and commissions are
different, they are used interchangeably.
The factors that led to emergence of Board and Commission type of organization structures are are-
1. The requirements for creation of bodies that can make minor changes and laws: The advent of
welfarism led to increase in activities of state. There was requirement for increasing the number
of laws. Besides the laws that are formulated should be flexible.
2. The requirement to adjudicate laws and address the minor grievances and issue: The welfare
activities increased the number grievances. There was an increase need for the role of judiciary.
The judiciary on the other hand was already overburdened.
3. To represent multiple interests: A variety of interests is involved in areas like public u utilities,
such as water and electricity. These multiple interests should be well-represented
well represented and reflected.
4. A body of experts: With the advent of welfarism, the issues have become knowledge intensive.
There was need for expertise in diverse areas. The bureau
bureau type of organization was limited and
could not deal with the newlyy arising issues.
5. To take unbiased decisions: A number of issues involved public interests. The bureau type of
organization is ineffective in dealing with such issues. Therefore, to ensure multiple
representation and unbiased decisions in issues that involved public importance, the boards
and commissions were created.
There are scholars who believed that boards and commissions are different. Willoughby
observed that board operates as a single entity and decisions are taken collectively, whereas the
head of an organization in commission takes independent decision.
Types of Boards and Commissions
Boards and Commissions may be broadly categorized into four - (1) Administrative Boar Boards
and Commissions: These types of boards and commissions manage department types of
organization. They are involved in line functions i.e. implementing and achieving a purpose. For
instance, Railway Board is established to achieve transportation of passengers an and freights. Other
examples are Central Board of Direct and Indirect Taxes. (2) Advisory Boards and Commissions
Commissions: As
the name indicates they advice the line functionaries. In other words, they are staff in nature. They
are usually attached to administrative bodies or institutions. For example, Central Advisory Board of
Secondary Education, All India Council of Technical Education, etc. (3) Regulatory Boards and
16-A/2, 1st Floor, Ajmal Khan Road, W.E.A. Karol Bagh, New Delhi
Delhi- 05
 011-25744391
Commissions . These are autonomous institutions undertaking legislative and executive functions.
They can t function as neither administrative nor advisory bodies. Some relevant examples are TRAI
(Telephone Regulatory Authority of India), IRDA (Insurance Regulatory and Development
Authority), etc. (4) Boards and Commissions attached to hierarchy.
hierarchy These are boards and
commissions at intermediate levels of hierarchy. For example, State Electricity Board.
Categories of Boards and Commissions
Boards and Commissions are categorized
categorized into three based on their creations - (1)
Constitutional Boards and Commissions: A number of Boards and Commissions are already defined
in the Constitution of India. Such Boards and Commissions are referred as Constitutional Boards
and Commissions. For instance, Article 315 defined UPSC, Article 280 defined the Finance
Commission and Article 324 defined Election Commission. (2) Statutory Boards and Commissions:
These bodies are established by legislative laws (or statutes). Some of the relevant examp
examples are
CVC, UGC and SEBI, etc. (3) Executive Boards and Commissions:
Commissions These bodies are established
through executive order. Planning Commission and National Development Council (NDC) are
established by executive order.
At the face of it, Constitutional Boards
Boards and Commissions are considered to be more
autonomous and powerful but it is not so in reality. One pertinent example is that the Planning
Commission of India which an executive is more autonomous and powerful than the Finance
Commission of India which is a constitutional body.
Independent Regulatory Commissions (Important)***
Independent Regulatory Commissions are organizational systems that exist in United States
of America. These agencies exist outside of the federal executive departments (those headed by a
Cabinet Secretary). More specifically, the term is used to describe agencies that, while
constitutionally part of the executive branch, are independent of presidential control, usually
because the president s power to dismiss the agency head or a member is limited.
Established through separate statutes passed by the Congress, each respective statutory
grant of authority defines the goals the agency must work towards, as well as what substantive
areas, it any, over which it may have the power of rule-making.
making. These agency rules (or regulations),
while in force, have the power of federal law.
Origin
With the advent of welfarism, a number of activities came under the ambit of state. The
number of traditional non-developmental
developmental functions, such as defence
defence and internal ssecurity
increased. The state had to come with more number of laws and legislations. The State had to
engage themselves in adjudication of laws. The increased in number of litigations should not
paralyze the state.
In US, there is separation of powers in three organs - legislature, executive and judiciary -
with mutual checks and balances. The executive, headed by President do not possess the authority
to create a new administrative agency. The power is with the legislature to creat create new'
administrative agency. On the other hand, there is increase demand for creation of agencies to
formulate laws to meet the demands of welfarism. There is need for certain type of administrative
agencies which can act as quasi judicial and administrative
administrative agencies. These bodies should be
capable to formulate and adjudicate laws.
st
Delhi- 05
 011-25744391
Furthermore, a society like US has very dynamic and vibrant private sectors. The private
sectors should not jeopardize the interests of the people at large. The public interests should not be
subdued by the profit agenda. The private sectors should not be engaged in malafide and unlawful
activities. To regulate and control the private sectors, there was need for creations of
administrative agencies.
Meanwhile the legislature, which
which had the authority, was not ready to create such
institutions or agencies. There was a deep seethed suspicion by the Congress (Legislature) that such
a body would be capable of interpretation, formulation and execution of laws and would come
under the President
esident of US. Therefore, the legislature created
created autonomous bodies and kept aw away
from the Presidential ambit and christened them as Independent Regulatory Commissions.
The first one was Inter-state
state Commerce Commission established in 1887. The Inter Inter-state
Commerce Commission regulated common carriers and was, thus able to render far reaching
orders, such as the desegregation of public transportation. After trucking and railroads were largely
deregulated, the ICC was eventually replaced with the Surface Transportation
Transportation Board, within the
Department of Transportation. Some other examples are -
 The Federal Trade Commission (FTC) enforces federal antitrust and consumer protection laws by
investigating complaints against individual companies initiated by consumers, businesses,
congressional inquiries, or reports in the media. The commission seeks to ensure that the
nation’s markets function competitively by eliminating unfair or deceptive practices.
 The Commodity Futures Trading Commission (CFTC) regulates commoditcommodity futures and option
markets in the United States. The agency protects market participants against manipulation,
abusive trade practices and fraud. Through effective oversight and regulation, the CFTC enables
the markets to serve better their important functions
functions in the nation’s economy providing a
mechanism for price discovery and a means of offsetting price risk.
 The Federal Election Commission (FEC) oversees campaign financing for all federal elections. The
Commission oversees election rules as well as reporting of campaign contributions by the
candidates.
Features of Independent Regulatory Commissions
 These commissions are created by the Congress
Congr (Legislatures).
 The members are appointed by the President of US in consultation with the Congress.
 The tenure ranges from 5 to 14 years.
 The appointment is staggered.
 The power of removal lies in President but depends on the provisions of statute crea
created by the
Congress in establishing the Commission. The procedures are very rigid. Every Commission has
its own statutes.
 The Commissions are independent and function with supreme authority. There are no bodies
which superordinate to these agencies.
Critical Analysis of Independent Regulatory Commissions (IRCs)
The Independent Regulatory Commissions deal with executive functions, formulate laws,
adjudicate laws and interpret laws. They are referred as fourth branch of American administration.
These commissions
mmissions can’t be categorized as any of the three organs - legislature, executive and
judiciary. But they are blend of all the three organs.

st
Delhi- 05
 011-25744391
These commissions appear completely autonomous and independent but it is not
completely true in reality. They are accountable to legislature, executive and judiciary. The
legislature has created these bodies, so they have the authority to dismantle them. The legislature
has the power to conduct investigation and scrutinized the activities of IRCs. The IRCs regularly
submit
ubmit reports to the legislature. The judiciary can exercise judicial review over the decisions by
IRCs. The executive (President) has the power of removal of the members of IRCs. The President
can play a critical role in budget of IRC and control the finance
finance to some extent.
All said the mechanisms are superfluous and limited. Therefore, IRCs are fairly independent
and referred as are islands of autonomy and headless. The intermittent reports submitted by IRCs
are not effective enough to hold them accountable. The judiciary itself is already cumbersome, so it
has no complete control over the IRCs. The President control in the budget of IRC is largely
determined by the Congress. The Congress has the authority of sanctioning, reducing, rejecting and
modifying the budget. The appointment of the members is staggered thereby reducing the control
by the President. Despite all the lacunae, the IRCs in US are credited for notab
notable works thereby
ensuring their existence.
Headquarter and Field Relationship
Headquarters (HQ) denotes the location where most, if not all, of the important functions of
an organization are coordinated. It is the place where the major decisions of the org organization are
taken. Fields, on the other hand, are attached offices along with the subordinate officers. They exist
to support the Headquarter in realizing the goals of the organization. These two terms are not
absolute rather relative. A headquarter itself
itself may become a field of another headquarter.
Rational for field agencies
There are a number of good reasons for establishment of field agencies. Some of the important
ones are -
1. To bring proximity between the administration and citizens: It is almost iimpossible to have
close contacts between the people of the state and headquarter. So, it is the field agencies that
has made possible for the people to have closer ties with the administration.
2. To bring economic and social development of the entire country:
coun The field agencies have been
established to bring inclusive growth of the country.
3. Need for Centralization and Decentralization: Administration requires both centralization and
decentralization for successful implementation and achievement of its programmes.
4. Political reasons: The field agencies, such as blocks and districts have been created for political
reasons.
5. Efficiency and economy of the regions: The field agencies are essential for efficiently
implementing the policies of the government.
government. The activities can be taken up at the right levels
thereby ensuring economy in implementation of programmes and policies.
Types of Headquarters and Field Relationships
Headquarters and Fields Relationship has been described by a number of scholars. Wil Willoughby gave
a three-fold classification -
1. Functional:: The field agencies of the headquarters are part of the separate functional hierarchies. The
lines of command and channel of communication run direct between the departmental headquarters
and their agents in the field and latter are directly responsible to
to their superiors at the centre. Each
Delhi- 05
 011-25744391
functional organization may create its own areas suitable for its own purposes and defined according
to those criteria relevant to the subject, matter of its particular field of policy. The technical operations
in the fields come under the direct control of the central experts which ensures direct supervision and
better efficiency. All questions of policy common to all and common matters are settled by central
administration. However, too much authority is concentrated at the central office resulting in
unwieldiness and unmanageable.
2. Territorial (or Unitary): The field agencies of the headquarters are a part of integrated
hierarchies. The lines of command and channel of communication run from the headquarters to
the area coordinators and vice versa and not directly to the functional lines. The French system
is a good example of territorial model. Deputy Commissioner in India before 1947 used to
achieve integration of field agencies in the district and all al the governmental ntal activities in the area
were entrusted to their care and control. The model avoids the general tendency to concentrate
too much authority in the central office and provides better flexibility and autonomy to the field
stations. Sometimes, it may lead to to divergence of policy and methods. There is lesser functional
unity between the field stations and headquarters.
3. Mixed: As the name indicates, the functional model is mixed with the territorial model. The
field agencies are established on functional basis basis but to ensure better coordination, some
territorial agencies are created. After independence, India followed mixed model. The District
Collector is responsible for maintenance of law and orders. And the Superintendent of Police
(SP) is responsible to the
he District Collector in assisting the maintenance of law and order. The SP
is also responsible to Director General of Police (DGP).
Luther Gulick distinguished three types of headquarters and fields relations. He tried to define the
relations by using two symbolic words - arms and fingers. The word ‘arms’ refers to regional and
geographical offices while ‘fingers’ means the line of communication reaching to the lowest field
units at the firing line. The relations are -
1. All Fingers: The central headquarter
headquarter office deals directly with the field units without the
intervention of any geographical or regional subdivisions.
2. Short Arms, Long Fingers: In this type of relation, the regional headquarters are located inside the
head office rather than in the field. But the field agencies are located far away from the head office.
3. Long Arms, Short Fingers/Long /Long Fingers:
Fingers The regional or geographical subdivisions are located
tar away from the headquarters. And the regional headquarters are located in the field fields.
Problems of Headquarters and Field Relations
The relationships between the headquarters and fields are very critical as the relationships
determine the effective performance of the administrative activities. Some of the limitations that
hamper the effective administration are -
1. Psychological Stereotyping: The people at the Headquarters carry a state of mind that the field
officials are lackadaisical and lazy - do not realize the urgency of the policies - and engaged in
corrupt activities. Meanwhile ile the officials in the fields believed that the officers at the
headquarters are idealistic and do not know the ground realities.
2. Differences in remuneration and privileges: The officers of the headquarters are provided with
better remuneration and privileges.
ivileges. Therefore, there is discriminating tendency between the
two groups.

st
Delhi- 05
 011-25744391
3. Failure to implement the tenurial system: The government of the country has failed to implement
the tenurial system which is required for mutual understanding between the offi officers from fields and
headquarters. As the officers tend to remain at the same place, either at field or headquarter, there is
lack of mutual empathy between the two thereby creating a rift between the two.
4. Lack of expertise, technology and resources at field agencies: The field agencies are deprived
of expertise, technology and resources which results in frustration of field units.
5. Lack of effective communication between the two: The field agencies complain of poor
communication resulting in inactivity.
inactivit
Methods to improve the limitations
The urgent need of the hour is to improve the relation between the field agencies and
headquarters to improve the governance of the country. It is in the interests of people of the
country that the relation is set right. The easiest way to achieve better relation is to remove all the
problems. It is easily said than done. Some of the methods suggested are -
1. The tenurial system should be implemented so that there is empathetic understanding between the
officials off the headquarters and field agencies. This will also remove the psychological stereotyping.
The policies formulated by headquarters will be more realistic, practicable and achievable.
2. The service conditions of both the headquarters and field agencies should should be made equal.
3. The field agencies should be provided with better technology, resources and finances.
Private-Public
Public Partnership (PPP)
Though the origin of Private-Public
Private Public Partnership (PPP) can be traced back to a long history,
but it has become very popular in the recent times only. In fact, the Private-Public
Private Public Partnership is in
vogue these days. The PPP is an association between private and and public entities to address the
public issues, such as education, medical care, health services, housing and electricity. The
collaboration is in between the state and private sector which includes markets, civil societies and
private individuals to achieve public purposes under agreed upon terms and conditions. This
collaboration is aptly defined by the incumbent Deputy Planning Commission, Montek Singh
Ahluwalia. He observed that the PPP is not about private project with public association. It iis
rather public project with the private association to achieve public goods.
In the partnership, the roles of both the state and private players are well
well-defined. The state
plays a very important role. It has following roles — (a) To ensure the legitimacy of the project (b)
To ensure citizen support in the project (c) To finance the project & (d) To assume the responsibility
for social, political and environmental risks.
The private players, on the other hand, have following responsibilities - (a) To provide
managerial effectiveness (b) To offer technological skills (c)To ensure overall effectiveness & (d) To
assume financial and operational risks.
Background
The popular notion is that PPP is a very recent development, contemporary concept and
followed frequently
uently by many countries in the recent years.
yea But PPP has a history prior to
governance or networked approach. It may be true that PPP has become more meaningful and
novel in recent days. But in the past history, there have been many incidents and occasion
occasions which
reflected the nature of PPP. Some pertinent examples in this regard are:
st
Delhi- 05
 011-25744391
 In 19th Century US, the water works were carried out by the private agencies. The water supply
was taken care by the private agencies since 1920 onwards in US.
 In Latin American countries like Costa Rica and Chile, the generation and distribution of
electricity has been with the private hands for a long time.
 In South American countries, such as Argentina and Uruguay, the entire rail network has been
taken up by the private
te agencies of US, UK and other European countries.
Thus it would not be perfectly true to give a sweeping statement that PPP did not exist before.
However, the presence of the PPP has increased in many dimensions in the recent past.
Theoretical Orientations
ns of PPP
There has been a long standing debate on the roles and spheres of a state. Some of the
important concerns are:
 Common Good Vs Individual Good
 Public Domain Vs Private Domain
 Single Public Sphere Vs Multiple Public Sphere
 Civil Society Vs State
 New Right Philosophy Vs Welfare State
 Centralization Vs Decentralization
 Efficiency Vs Accountability
♦ Common Good refers to certain type of activities, which are beneficial to everyone involved.
♦ The Individual Good restricts to the benefits of a few individuals.
♦ Public Domain, in parlance, maximizes the public welfare, goals, values and interest.
♦ Private Domain per se maximizes the individual’s interest.
♦ Single Public Sphere refers to a type of discourse, society or community where everyone in tthe
society has a similar interest. In fact, everyone enters into a single debate and has equal
participation.
♦ Multiple Public Spheres is characterized by multiple spheres. There are many single spheres.
The multiple groups enter into many different debates.
debates. There are as many debates as spaces
and spheres.
It is a mooted debate that what a state should provide - public good or private good? There are
many who believe that a State should act as an institute to provide and promote what is good for
the public i.e. public good. The state remains in public domain, so it should provide the public good.
But there are also people who believe that the state should remain in private domain so that it can
maximize the private good. This view is restricted in nature.
The
he state to address the public good should enter into dialogues and associations. There
should be all round participation. Though every individual has private interest but when individuals
come together and interact with each other, the public interest slowly slowly overpowers the private
interest. This idea is contradictory.
The civil societies are believed to be different from the State. This has led to an on
on-going debate on
Civil Society versus the State.
The ideas about the demarcated and well-defined
well defined roles and spheres of state do not
necessarily sustain in modem era. There are instances in which a state enters in private and works
st
Delhi- 05
 011-25744391
for private good. The State instead of providing public good enters into maximizing
maximizing private interest.
For example - 40 lakhs tonnes of food-grain
food grain were rotting in Punjab. These food
food-grains could have
been provided to poor and marginalized. The State did not distribute on the pretext that the
carriage and distribution charges are very
very expensive (Rs 27 Crores). The government could have
spent Rs. 100 crores or so, in construction of storage facilities. Thereby, the State could have
utilized the food-grains
grains judiciously instead of letting the food-grains
food grains rot leading to massive
wastages.. On the other hand, the private may also enter in the public domain. It is not true that the
private is incapable of performing activities which involves public good. The private players today
are providing public good, such as education and construction roads and bridges, etc.
In relation to state entering to dialogues, every entities and individuals try to maximize their
own private interest. The participants bargain for their own benefits in the name of public interest.
As far as the single and multiple public spheres are concerned, the single public sphere usually
excludes the multiple publics sphere. And the single public sphere is included instead of multiple
public sphere.
Henceforth, it may be concluded that the state does not necessarily always wor work for the
public good. And the private sector is not incapable of public good. There should also be
involvement of multiple publics to maximize the public good. Broad-based
Broad based discussions involving
more entities and groups will enhance the capability to maximize
maximize the public good. The multiple
publics through bargaining, dialogues and negotiations can bring better administration and bringing
about more public good. This concept is .very similar to the concept of good governance networked
approach. In other words,, the traditional understanding is no longer completely true. And the
contemporary and recent developments points towards a networked approach. There is a
paradigm shift from single-actor
actor to multiple-actor
multiple paradigm.
_______

st
Delhi- 05
 011-25744391
CASE STUDIES ON PUBLIC PRIVATE PARTNERSHIPS – WORLD
BANK CASE STUDIES
Brazil
Reference: Case Study: São Paulo Telecentres Project
This case study is about the involvement of RITS (Rede de Informacão para o Terceiro Setor), a
Brazilian civil society organization involved in ICT policy monitoring and advocacy – in setting up
community access centers (telecenters) in São Paulo which inspired various policies to roll out
telecenters
nters in Brazil. (…) This partnership-based
partnership based project mobilized policy, investment and technical
support leading to the establishment of 128 community-based
community based telecentres. The São Paulo model
was based on free public access to facilities and training, community
community participation in management,
free and open source software, and development of the community telecentre as a venue for social
organization.
India and Africa
Reference: Case Study: Rural Broadband Backbone (In English, Spanish, and French)
This document discusses different approaches to establishing a broadband network in rural areas. It
explains how ICTT can aid in eliminating poverty and why ICT pro-poor
pro poor policies are important for the
short and long-term
term development of an economy. It covers various examples of ICT projects in India
with direct investment from the government as a public operator, and on Africa where the ICT
facility was executed by a public-private
private consortium.
India
Reference: Case Study: Digital Inclusion Policies: Some Lessons From India (In English, Spanish,
and French)
The paper discusses the Common Service Centres (CSCs) scheme established by the Government
under the National e-Governance
Governance Plan. The plan creates a network of CSCs in India’s rural zones,
which are led by the private sector to promote digital inclusion.
Indonesia
Reference: Public-Private
Private Partnerships and the Poor - Case Study- Jakarta, Indonesia. Drinking
water concessions, (a study for better understanding public-private
public private partnerships and water
provision in low-income
income settlements)
This document examines several veral aspects of private sector participation in the drinking water
concessions in Jakarta. The objective of the report is to:
 study the agreements and resulting outcomes;
 describe the perceptions of the different stakeholders;
 describe measures to improve the accessibility of drinking water for the urban poor; and
 discuss alternatives in developing partnerships with community-based
community based organizations.
Nairobi
Reference: Public-private
private partnerships and the poor - Case Study- Kibera. Small enterprises and
water provision in Kibera, Nairobi
This is a case study on private sector participation
participation in the water sector in Nairobi, Kenya, particularly
in the largest informal settlement of the city, called Kiberia. The case study analyzes a project which
was developed to re-arrangearrange the existing public-private
public private partnerships where private sector
Delhi- 05
 011-25744391
participants
rticipants were small local providers and established water services across informal settings. The
document analyzes the underlying principles of this particular project and describes why water
provision in a public-private
private partnership is a significant facet
facet of the sector in filling gaps for effective
implementation of services for poor consumers.
Global Practices towards PPP in Infrastructure Development
While discussing the infrastructure development, a generic question arises, ‘Why is PPP
needed?’ In the face of fiscal and other constraints, governments of most emerging economies
have been turning towards the private sector as a means of financing infrastructure development.
Many countries have, however, found that it is not always easy to attract the private sector, as the
conditions for their participation are, in most cases, different from the traditional method of
funding. A closer alliance between various parties involved in the infrastructure development will,
however, provide the opportunity
rtunity to share their views on the risk perspectives, legislative and
regulatory environments, which support private investment, project funding packages, project
formulation and the means of reducing project preparation and gestation period. It has been
empirically proved that “both the public and private sectors have significant effect on each other,
the magnitudes of the long-run run influence of private production on infrastructure expansion are
relatively greater than the reverse for most countries” (Eric C Wang 2002). Review of cross
cross-country
experiences while adopting the PPP model in the infrastructure development would provide due
solution to the critical question raised at the beginning of this Section.
Section
A number of OECD countries have well established PPP programmes. Other countries with
significant PPP programmes include Australia and Ireland while the US has considerable experience
with leasing. Many continental EU countries, including Finland, Germany, Greece, Italy, the
Netherlands, Portugal and Spain ain have PPP projects, although their share in public investment
remains modest. Reflecting a need for infrastructure investment on a large scale, and weak fiscal
positions, a number of countries in Central and Eastern Europe, including the Czech Republic,
Hungary and Poland, have embarked on PPP. There are also PPP programmes in Canada and Japan.
The PPP in most of these countries are dominated by road projects. Similarly, the EU Growth
Initiative envisages the use of PPP type arrangements primarily to develop develop trans
trans-European road
network.
While focusing on country specific practices, the PFI of the UK is perhaps the best developed
government’s PPP programme,
rogramme, which also comprises privatisation and other forms of cooperation
between the public and private sectors,
sectors, including the provision of guarantees. The PFI projects are
viewed primarily as being about the provision of services, and not about the acquisition of assets. In
this Endeavour,
ndeavour, the private sector makes a long-term
long term commitment to maintain assets and provide
services, and the government makes a long-term
long term commitment to procure those services; significant
risk is transferred to the private sector; public sector investment projects are considered for PFI

st
Delhi- 05
 011-25744391
where they are likely to represent value for money,money, and where it meets the UK government’s
criteria for efficiency, equity and accountability (IMF, 2004).
In the case of Ireland, the pick up in enthusiasm for PPP can be summarised that there was
quick buy-inin on the part of all PPP stakeholders, where the government made it clear that its social
partners would be consulted on the approach taken to select PPP projects. Second, the government
paid more attention to the efficiency benefits of PPP than to just their fiscal advantages. Third,
conclusion was reachedched that the PPP would be a success despite some institutional challenges that
had to be overcome. To facilitate the PPP process, the National Development Finance Agency of
Ireland was set up to mobilise resources to finance PPP projects and to provide fi financial advice to
government agencies seeking to form PPPs.
Chile’s experience with PPP has been successful and a significant portion of the sizeable
infrastructure gap was fulfilled through this model. Chile’s success with PPP has been underpinned
by a solid
olid institutional framework, well developed procedures to identify, evaluate the projects,
efforts to ensure adequate sharing of risks between the stake holders, and reforms to ensure the
availability of financing for projects. In the case of Mexico, most progress has been made with
respect to telecommunications, ports and airports, but this mainly takes the form of privatisation.
Empirical evidence suggest that public infrastructure in Mexico has negligible effects on private
sector costs.
The PPP has been en operating in China for over 20 years. Since the introduction of open
economic policy in early 1980s, some state-ownedenterprises
state ownedenterprises started their reform by becoming a
limited liability company. Since the 1990s, some local governments have initiated to reso resort to the
private sector on the provision of public facilities and services. Since 2000, the PPP has become one
principal strategy used by the Chinese Government in the provision of public facilities and services.
The main objective of PPP is to make use of of market competition in order to ensure the effective use
of resources in the provision of public facilities and services. However, some local governments
place too much emphasis on attracting private investments by offering even more favorable terms
than the normal national status.
Lessons Drawn for India

Many developing countries like China, have developed toll roads and a number of private sector
greenfield power projects, while Argentina has developed its power sector mostly through
divestiture and greenfield
enfield investments. The main aim of the Chinese is to attract investors through
PPP. Brazil has not only attracted more greenfield projects in power sector but also known for its
telecommunication sector development under PPP model. The UK provides guaran guarantees for PFI
projects to attract more investment. Chile, on the other hand, has succeeded in the PPP model with
institutional development, standardised contract procedures and appropriate risk sharing
mechanism. Cross country analysis reveals that the PPP model differs widely across countries and
sectors. Overall, many developing countries have developed their power projects, roads, telecom,
ports and airports through PPP model, which they considered as the apposite
pposite way of developing
the public infrastructure through private participation, while these countries have faced fiscal
constraints. Judging from the country experiences, the selection of right PPP model is based on the
concessions that the PPP is getting,
getting, level of development, risk sharing mechanism, government
guarantees, stability of the policy environment and commercial consideration of the projects.

st
Delhi- 05
 011-25744391
Therefore, it is rightly accepted that right type of private participation in the infrastructure
development
lopment with right risk sharing is the only way out to build public infrastructure and thereby
bridge the infrastructure gap.
******

st
Delhi- 05
 011-25744391

Handout - 4

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Handout - 4

Uploaded by

Copyright:

Available Formats

STUDY MATERIAL – HANDOUT

For Feedback, write to synergyias143@gmail.com 1

For Feedback, write to synergyias143@gmail.com 2

For Feedback, write to synergyias143@gmail.com 5

For Feedback, write to synergyias143@gmail.com 7

For Feedback, write to synergyias143@gmail.com 10

Global Practices towards PPP in Infrastructure Development

For Feedback, write to synergyias143@gmail.com 12

Lessons Drawn for India

For Feedback, write to synergyias143@gmail.com 13

For Feedback, write to synergyias143@gmail.com 14

You might also like