Dmf Privatisation Vikas

8/12/2019 Dmf Privatisation Vikas

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Importance of Privatization & Outsource management

a new way to built urban infrastructure

Department of Architecture & Regional Planning Indian Institute of Technology, Kharagpur

Vikas Kumar Nirmal

08AR6031



Importance of Privatization & Outsource Management

Development, Management & Finance

ABSTRACT:

This document is aimed at telling the modern ways to built urban infrastructure by privatization

and outsourcing or public works. The involvement of corporate world in urban facilities has

made the amenities more efficient with many facilities like banking, education and even in

physical infrastructure like road construction, telecommunication, solid waste management etc

are undertaken by corporate enterprises. This does not only provide better facilities to public but

also huge revenue to government. The entry of private enterprises in public works makes public

amenities more efficient and hence simultaneously overcome the shortcomings of government

organizations. The lack of money, manpower & equipments and basic infrastructure in

government organizations draws the interest of private enterprises in public works as the

private sectors tries to broaden their field of areas in order to increase their business.

Outsourcing of various works like road construction, sewerage & sanitation engineering, solid

waste management has given lot of freedom to government sector to invite more & more

private businessman into public works and generate revenue. The media world for advertising &

publicity also has a wide scope of capital earning which allows government organization to have

control over private sector.



Importance of Privatization or Outsource Management

Development, Management & Finance Page 0

CONTENTS:

1. PRIVATIZATION

• How important is privatization in India?

2. NEED & OBJECTIVE OF PRIVATIZATION

3. BENEFITS FROM PRIVATIZATION

• Less investment cost

• Efficient management system

• Term Based Contracts

• No Operation & Maintenance Headache • Work done by Trained Professionals

• Bureaucracy & Corruption reduced

• Revenue Generation

4. DRAWBACKS OF PRIVATIZATION

• Control in Private Hands

• Social Welfare is Disregarded

• Work Coordination • Low Reliability of Long Run Benefit

• Reduce sovereignty of Government Institutions

• Need of PSUs is converted to Habit

5. BEST PRACTICES THROUGH PRIVATISATION

• Comprehensive Contract of Solid Waste Management in Ulhasnagar

• Lake Conservation by Multiple Stakeholders, Thane

• PPP for Street Lighting Energy Conservation, Bangalore

6. IS PRIVATISATION THE ONLY SOLUTION

7. BIBLIOGRAPHY





1. PRIVATIZATION

Privatization and its value for the public works industry is required in all fields from surveys,

analysis, construction, execution etc. The present scenario of government organization in

public works department shows the inefficiency or ineffectiveness whether due to lack of fund, manpower or ill equipped condition. Most of these organizations are diseased with

corruption & irresponsible behavior of government officials. The recent trend of inviting

private sector in public works has seen quite a good number of results. Involvement of

private organization in public works has increased efficiency in public amenities like water

supply, solid waste management, road construction etc. These private sectors have also

benefited using public sector as a step for their business marketing & advertising policy.

There was a time when holding a government job used to be considered something

prestigious. Even a lineman in telecom department, earning a meager salary, used to be

looked up with respect. This was the time when government sector had the monopoly and

people from private sectors were totally dependent on them.

How important is privatization in India?

The first order issue is that of competition policy. Once competitive conditions are ensured,

there are, indeed, benefits from shifting labour and capital to more efficient hands through

privatization, but this is a second order issue.

The difficulties of governments that run businesses are well ‐known. PSUs face little "market

discipline". There is neither a fear of bankruptcy, nor are there incentives for efficiency and

growth. The government is unable to obtain efficiency in utilizing labour. There is a

fundamental loss of credibility when a government regulator faces PSUs in any sector.

When we look at various industries in India, the gains from privatization are quite

heterogeneous simultaneously there are hopelessly loss ‐making PSUs. These operate in

industries where private and foreign firms have been able to come in, and the PSU has been

left far behind the standards of quality and price set by the private sector. The PSUs should

ideally have been sold off long ago, but today, these firms are irrelevant for the competitive

dynamics of the industries that they operate in.





2. NEED & OBJECTIVE OF PRIVATIZATION:

State and local governments increasingly are relying on the private sector as an alternative

to providing goods and services that traditionally have been their own responsibility. Part

of the solution to dealing with the perceived problems of redundancy, waste, inefficiency,

and ineffectiveness of an entrenched bureaucracy has been to privatize many services. Over

the years government has taken a great deal onto itself.

The objective is to provide the best possible infrastructure & other amenities to public in

minimum time distance. The motive is clear with huge number of private contractors

coming in to do job in public works with efficient labour and capital, even the local bodies

are not reluctant to entertain them as their own problem of ineffectiveness is been getting cured with the introduction of these private enterprises. Public ‐private going hand in hand

has been given importance because of growing population, urbanization, migration and

several other factors. The authorities are left with no choice as they have neither sufficient

manpower nor the money so approaching outsource consultancy firms to do the job is best

which is growing in faster trend as these corporate firms also wants to increase their

horizons to broader perspectives.

An example of a service successfully given back to the private sector is one of municipal

refuse and garbage services. The experience with contracting of municipal refuse and

garbage services has resulted in cost savings of 40% to 60% when local governments have

selected this alternative. Contracting has worked well with other municipal services, such

as wastewater and sewage treatment, in which the costs of contracting these functions

have been half of what they were when the municipality or local council provided them.

The cost of municipal hospitals has been significantly reduced by contracting out services

such as ambulance, maintenance, laboratories and food services. Municipal recreation

facilities such as golf courses, swimming pools and stadiums are desirable possibilities for

privatization through contract operation. Although the facilities still remain under

municipal ownership, the actual service provision is in the hands of a private contractor.





3. BENEFITS FROM PRIVATIZATION

Less investment cost

• The investment from public sector reduced considerably as private sector comes with

capital & labour in their hand. • The revenue or tax collection directly comes to urban local bodies and they pay to

private consultancy firm accordingly.

• Privatization has boosted competition, which has further helped in improving the

quality of products, and at times, has reduced the cost also.

Efficient management system

• Privatization increases the efficiency in management of urban utilities.

• Better management, skillful personnel provides better hand in engineering services.

• Better utilities & amenities upgrade the quality of life in city.

• The better the work, more the money criteria of private sector has proper utilization

of time & manpower.

Term Based Contracts

• This actually gives flexibility to local authority to examine the standard of services

provided by different private enterprises as competition comes into play.

• The competition between various private firms also reduces the cost of services.

• Contracts & agreements are also term based as examining or private organization is

also done by local authorities if they feel that it’s not working efficiently then local

body anytime can cancel the contract and give to other organization.

• The main motive for term based contracts is to check market trend in service sector.

No Operation & Maintenance Headache • Operation & maintenance cost is barred by the contractor in most of cases as per the

agreement and local authority can be free from its headache.

• Purchasing of new equipments & appliances like vehicles is totally done by contractor

without any concern to local authority.





Work done by Trained Professionals

• As we have seen most of the technicians opt for private organizations to work in

against government offices because of better pays & incentives provided by

corporate field so involvement of private sector bring skillful professional to work on

job rather than authorities employees who are jack of all trades.

• The work pattern of these professional is seen as the quality of service improves with

technicians offer modern & better techniques in all sectors.

Bureaucracy & Corruption reduced

• The bureaucracy and corruption is reduced which create hurdles in between process.

• The corruption from higher to lower order, from Chief In‐charge to clerks reduces to

great extent as private body does not concerns with internal issues prevailing inside

the local bodies work pattern.

Revenue Generation

Revenue generation through several methods:

• Advertisements at spaces such as bus stops, road side billboards/ hoardings.

• Shopping & eating outlets at bus stands, metro & railway stations & airports to

generate revenue which can be used as running & maintenance cost.

• Eateries, ATMs, custom shops besides petrol & gas pumps.

• Toll plazas on highways & expressways.

• Introduction of parking fees at public places.

• Selling of recyclable trash after treatment rather than disposing in landfills.

• Central & State governments are relaxed from major hike in funds & grants.





4. DRAWBACKS OF PRIVATIZATION

Control in Private Hands

• All control in private hands actually doesn’t have any transparency towards public.

• This type of management system is prone to become capitalistic and profit ‐driven

policy which will be run by corporate and private consultancies.

Social Welfare is Disregarded

• Social welfare which is the prime agenda in providing urban amenities is the

secondary priority of outsource consultancy against main focus to profit generation.

• Ethical values and social responsibility towards people is neglected.

Work Coordination • Coordination between various outsource consultancies assigned separate works

create chaos in public places by activities such as earth digging, construction etc.

• Even the handling issues come in picture with different works assigned to different

organization there is a risk of proper management & finance

Low Reliability of Long Run Benefit

• The public works are carried out for long run & sustainable development Long time

benefits should also have high reliability on optimum standards of services.

• The unwillingness of government organizations to examine the private sector service

risk the execution of works as per norms and conditions discussed in the contract.

Reduce sovereignty of Government Institutions

The government institutions or PSUs lose their credibility as the private contractor

directly works for public welfare that too at cheap rate & quick time. Taking any case

such as case of banking, airlines, public works, health & education, private sectors have left PSUs far behind in process of execution of strategies.

Need of PSUs is converted to Habit

The need of the hour is getting converted to habit as in all fields they go for outsourcing

irrespective of attaining achieving efficiency with new techniques, policies & strategies.





5. BEST PRACTICES THROUGH PRIVATISATION

I. COMPREHENSIVE” CONTRACT OF SOLID WASTE MANAGEMENT IN ULHASNAGAR

The initiative

Ulhasnagar Municipal Corporation has given out a comprehensive solid waste management contract for collection of waste at source, transportation, secondary storage and spreading

it on landfill site.

Features

• Entire investment in providing community bins, transport equipment, equipment for

leveling of waste on the landfill site, manpower etc is that of the contractor.

• The O & M of existing infrastructure at landfill site i.e., roads, lighting, water supply, sanitary

facility etc. and the operation of vehicles & leveling of waste is responsibility of contractor.

• A six‐month period was allowed for planning of operations; procurement of vehicles,

equipments or accessories and their commissioning.

• The work is carried out in two shifts and a third shift is allowed in exceptional cases.

Results

• The Municipal Corporation could achieve cleanliness without investing in the capital cost.

• Involvement of private operator has helped in solving the problem of lack of sufficient

Municipal staff and lack of resources to employ new staff for SWM activities.

• The capital investment and the deployment of staff for operation and maintenance was

completely borne by the contractor.

• Ulhasnagar is one of the few cities that have made provisions to segregate the waste at city

level in a comprehensive manner from door ‐to ‐door collection to landfill site.

II.

LAKE CONSERVATION

BY

MULTIPLE

STAKEHOLDERS,

THANE

The Initiative

The Thane Municipal Corporation (TMC) commissioned a unique project, ‘Lake

Conservation and Management Program ’ with the aim of Re‐development of lakes by

remediation, control of pollution and beautification. Constituents of projects are





to sewerage ingress, indiscriminate dumping of solid waste and effluents, and idol

immersion.

Features:

• Partners like Thane Municipal Corporation, GOI through MOEF: Partial funding (varies for

different lakes), state government through the MMRDA: Financial assistance, NGOs, MLAs,

MPs and citizens: Awareness generation, monitoring committee.

• Private partner on BOT basis: maintenance of lakes. Use of lakes for recreational purposes.

Operation and maintenance services are borne by private provider and revenues are earned

from recreational activities.

• Restoration of lakes , Cost reduction, Dissemination of the latest technological trends.

Role of BOT contractors :

The financial allocation for the lake conservation project was Rs. 13 lakhs per ha. Out of this,

only Rs. 6.5 lakhs per ha have been utilized. The remaining funds have been used for

servicing more lakes and also to carry out beautification projects for the existing 36 lakes.

As the BOT contractors have taken up the entire capital investment and O&M, they share a

large part of the risk with the corporation. The contractors plan the activities around the

lakes with approval from TMC. According to TMC, the main reason for involving the private

contractors was not just cost saving, but better maintenance of these public places.

Outcome

• 10 lakes selected; four lakes remedied. Maintenance job leased out for 25 years.

• Restoration of lakes through bio ‐remedial system.

• Creating environment awareness in the society.

• Dissemination of the latest technological trend to the local educational institutes.

• Cost

reduction

in

lake

maintenance

and

beautification.

III. PPP FOR STREET LIGHTING ENERGY CONSERVATION, BANGALORE

Project Introduction

Re‐engineer or transform the technical management of street lighting infrastructure for

efficiency, improvement and energy conservation using state ‐ of ‐the ‐ art energy saving





equipment. Elpro Energy executed the PPP project with the Bangalore Development

Authority for energy efficiency in the street lighting system.

Features:

• Encourage private participation in the state’s infrastructure development activities.

• Reduce the operational & maintenance costs of the street lighting system of 63 km long

Outer and Inner Ring Road around Bangalore, which currently has a total load of 1.1 MW.

Outcome

The project at ORR‐IRR for BDA Bangalore has generated energy savings to the tune of

40 ‐45% monthly and thus has satisfied the main objective of the project i.e energy savings.

The annual maintenance bill of the street lights themselves has reduced from approximately

Rs.60 Lakhs in the year 2004 ‐05 to Rs.29 Lakhs in the year 2005 ‐06.

Benefits to BDA

• Huge Energy savings annually.

• Excellent Central Operation and maintenance of Street Lights.

• Centralized monitoring of all streetlights.

• Less Labour costs.

• Less

Capital

Expenditure

on

lamps

and

fittings.

• Less Contract Charges and better Contractors’ monitoring.

• Improved public image as a cost conscious and efficient public service provider.

Conclusion :

PPP was considered an effective policy solution to help BDA to implement the energy

efficiency upgrades required for the street lighting infrastructure of the ORR. It was widely

agreed that development of Municipal energy infrastructure cannot be achieved based

solely on public financing and that PPP is expected to play a crucial role and make significant

contribution. With optimal role sharing between public and private sectors, PPP can be

applied to many developing towns and cities. BDA is estimated to save Rs.7.2 crores in the

next 10 years of the project life.





6. IS PRIVATISATION THE ONLY SOLUTION

No, privatization is not the answer. What works is effective public ‐private partnership,

where the private players build and run the systems and the public sector remains in control of pricing. Water treatment systems, sewerage treatment plants, solid waste

disposal system cannot exist without subsidies and grants. Subsidies need to be given

initially to allow countries to secure proper physical infrastructure and better health

facilities. At this stage, due to growing urbanization trend the daily operation of all amenity

system is essential for smooth running or utilities & services.





7. BIBLIOGRAPHY

Books:

• ITPI Readers volume ‐ Development & Management

Author: Professor N.S.Saini

Websites:

• www.bmrda.kar.nic.in

• www.niua.org

• www. wikipedia.com • www. google.com

Documents

Dmf Privatisation Vikas