Government to Lease Out 10 Airports via PPP Model

Syllabus: GS3/ Infrastructure

Context

• The Union government is consulting on leasing out more than 10 airports across the country under the public-private partnership (PPP) model.
  • The government is leasing out the airports to improve their management by utilising private sector efficiency and investment.

Public-Private Partnership (PPP) Model

• The Public-Private Partnership (PPP) model is a collaboration between the government and private sector entities to deliver public infrastructure and services efficiently.
  • In India, PPPs have been widely used in infrastructure, healthcare, education, and urban development.
• Benefits: It leverages private sector efficiency, investment, and expertise while ensuring public sector oversight and social welfare objectives. 

Types of PPP Models

• Build-Operate-Transfer (BOT): The private entity builds the infrastructure, operates it for a specified period, and transfers it back to the government.
• Build-Own-Operate (BOO): The private player builds, owns, and operates the project indefinitely.
• Design-Build-Finance-Operate (DBFO): The private sector designs, builds, finances, and operates the project for a concession period before transferring it.
• Hybrid Annuity Model (HAM): The government provides a portion of the investment, reducing private risk while ensuring efficiency.
• Swiss Challenge Method: A private player proposes a project, and the government invites competing bids before final selection.

Significance of the PPP Model

• Technology Transfer: It facilitates the adoption of modern technology and global best practices.
• Reduces Fiscal Burden: The model lessens the financial pressure on governments by involving private capital.
• Improves Service Efficiency: Private sector expertise brings efficiency, innovation, and quality control.

Concerns with  PPP Model

• Regulatory Uncertainty: Frequent policy changes and bureaucratic hurdles deter private investment.
• Financial Viability Issues: Long gestation periods and cost overruns pose financial risks.
• Risk Allocation Disputes: Poorly structured contracts lead to conflicts between private players and the government.
• Delays in Project Execution: Land acquisition issues, environmental clearances, and slow decision-making delay projects.

Government Initiatives for Strengthening PPPs in India

• National Infrastructure Pipeline (NIP): Aims to boost PPP investments across sectors.
• Viability Gap Funding (VGF): Provides financial support for infrastructure projects to enhance their viability.
• India Infrastructure Project Development Fund Scheme (IIPDF): The scheme provides financial support for project development expenses of PPP projects.
• National Monetisation Pipeline (NMP): The initiative was announced in 2021 to create infrastructure by tapping private sector investment.

Concluding remarks

• The PPP model remains a vital tool for infrastructure and service development in India. 
• While challenges persist, effective policy measures and innovative financing solutions can maximize the benefits of PPPs, fostering sustainable economic growth.

Source: BL