How public private partnerships must evolve to create social impact

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum. Author: Chirag Jain, CEO, Ashika Capital and World Economic Forum Global Shaper, Mumbai Hub

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Every human being has the right to water, sanitation, economic growth, education and health. These are some of the goals that the United Nations has envisaged in the form of the 17 Sustainable Development Goals, which it wants nations and governments to achieve by 2030.

Our right to sanitation and water, for example is a human right, as recognised by the United Nations, and is SDG No 6. However, 2.2 billion of the population still don’t have access to safe drinking water services, according to the UN Children Joint Monitoring Programme and World Health Organization (WHO). Meanwhile, 4.2 billion people – more than half the world’s population – still have no access to safely managed sanitation services. UNICEF’s Water Sanitation and Hygiene (WASH) assessment shows that 946 million people still defecate in the open.

As a Brookings Institution report estimates, it may take anywhere between $5- and $7 trillion annually for developing countries to achieve the SDGs by 2030. For India, the financing gap is $565 billion.

How PPPs can help

So, the chasm between how far we have come and how far we need to go is still a wide one. Government resources alone are typically not sufficient to close the gap. An effective way to do so is through public private partnerships (PPPs).

There is no one definition for a PPP, but it is broadly acknowledged that a PPP is a contract between a government body and a private one to deliver a public service or provide an asset for the public. The contract is a long-term one, and the risk is borne by the private party. Returns are linked to how well the private firm performs.

A win-win situation for all stakeholders

PPPs can be a win-win for all stakeholders concerned. The government body or state benefits by achieving its goals; the private firm has a positive social impact and boosts its revenues; while the customer, or end-user, benefits from the service.

There are different types of PPPs, including but not limited to Build-Operate-Transfer, Design-Build-Operate, concessions, joint ventures, service contracts, affermages – in which the private company operates and maintains the asset but does not finance it – and leases. The choice depends on the government and the private investor, and also the nature of the project.

Singapore’s new sustainable water supply and sanitation system is a good example of a PPP model for sanitation-related projects. The model, first introduced in the early 2000s, has been very successful in helping the city-state with treatment of waste water. The PPP has helped the government build big water facilities, including desalination and plants for reclaimed water.

According to a joint white paper between FICCI Water Mission, 2030WRG and Powertec, the Public Utilities Board in Singapore has adopted the design-build-own-operate model, and agreements are for 25 or more years.

PPPs could also help India achieve its goals in the area of sanitation. Now that the country is “open defecation free”, the time has come to focus on PPPs in areas beyond building toilets.

‘After The Flush’ programme

There is a huge untapped market for collection, safe management and treatment of faecal sludge. Population Services International (PSI) India’s ‘After the flush’ pilot programme in Patna, funded by the Bill and Melinda Gates Foundation, is a great example of efficient feacal sludge management (FSM).

To take this pilot to the next level, PSI is partnering with the Forum of Young Global Leaders over the next two years to scale the initiative across 10 Tier-2 cities in India.

According to PSI’s study, just 11% of faecal sludge generated in Patna was transported to the public sewerage treatment plant through the sewer system. The remainder was disposed of in public spaces and rivers. Also, only 21% of household toilets were connected to the sewer grid, while 65% were attached to a septic tank. This meant that 89% of human waste was being collected by the private sector, which was largely unregulated, and also disposed of without any kind of treatment.

Because a majority of Patna’s households were connected to septic tanks, they had to rely on faecal sludge removal services, provided by private tanker operators, not recognized by the government.

PSI’s response was to build a partnership with the Patna Municipal Corporation and ensure that private tank operators were regulated. It also helped open up city sewage pumps and treatment plants to private operators. The dumping load for private operators was fixed at $1.50, down from the earlier suggested $4.50. A further incentive for private tank operators was the formation of an association, which helped them interact with the government more efficiently. On the consumer front, PSI set up a consumer hotline so they could access pit cleaning services with registered operators.

As of January 2019, PSI’s project in Patna has ensured that 25% more sludge (an increase of 2.7 million litres) has entered the municipal sewage treatment plants, which would otherwise have been dumped randomly .

A report by the Toilet Coalition Board (a PPP and business-led platform) talks about how the new sanitation economy has huge potential in India, in terms of private investments. According to its report, the sanitation market could be worth $62 billion in India alone. The market for products from toilet resources and organic/biological waste is expected to grow to $25 billion by 2021.

This is a huge opportunity for the private sector to invest in, because sanitation is one of the key SDG goals, and the economy around it makes excellent business sense. Sanitation is, of course, an important concern for the government. In such a context, going forward, this is an area where PPPs could thrive.

A “people first” approach

One of the newer concepts currently taking shape is the People-First PPP, such as the Minas Brazil Solar Farm, which aims to generate clean and affordable energy. The private player is Plexo Solar, which will design, build, finance, operate and maintain the project. The public entity is CEMIG, which manages distribution lines in the state where the project will take place.

According to the UN Economic Commission for Europe (UNECE), the people-first approach will ensure that people stand to gain the most among all the other stakeholders of a project. The focus should be on enhancing the quality of life of local communities, be it through alleviating poverty, providing education, promoting gender equality or meeting any of the 17 SDGs as enshrined by the UN. This is increasingly being promoted as a model for stakeholders in a PPP.

Lessons learned

One lesson for PSI India from the Patna pilot project is that a robust partnership with the government is crucial for FSM to be successful. Not only did they learn that “government requires technical support and hand holding to engage with the private sector” but also, that strong communication channels are of the essence when it comes to government and private partnerships.

Governments have benefited from the skills brought in by the private sector. What’s more, the private sector reduces the burden on public budgets. Going a step further and making it a people-first approach will benefit communities, and bring lead nations one step closer to achieving the SDGs.

In conclusion, it is appropriate to remember why PPPs evolved in the first place. They are partnerships wherein public services will be delivered to citizens who understand they must pay a fee for such services.

The success of PPPs hinges on the clarity of vision among stakeholders and a well-charted strategy for implementation, although there is no one-size-fits-all solution.