Wednesday, June 18, 2014

Government mulling new PPP platform to give big push to infrastructure development 
New Delhi, 18 June, 2014: The government is mulling a special platform to allow infrastructure players to renegotiate already bid public-private partnership (PPP) projects, a move aimed at giving a big push to infrastructure development in the country.

Discussions have begun on creating a 'resolution panel' in line with global practices as the government looks to breathe new life into PPP implementation.

"A number of issues keep cropping up in PPP....Allowing renegotiation after a project is bid out has emerged as a crucial challenge in most infrastructure sectors," said an official at an infrastructure ministry, who is privy to deliberations on the issue.

Most countries have a provision for renegotiation of contracts under the PPP mode. For example, South Africa's PPP unit is empowered to approve changes in conditions. Similar models are followed in many other countries.

In India, renegotiation of contracts has been done very selectively. C Rangarajan, who was chairman of the Prime Minister's Economic Advisory Council until last month, was asked to look at resetting of premia for road projects when a number of projects got stuck in the economic downturn.

The finance ministry had recently called a meeting to discuss what needs to be done for the PPP framework to support the new government's big infra push.

Industry experts say PPP contracts need to recognise 'Black Swan' events. "Renegotiation is necessary in PPP .It happens all over the world and is needed.... It is humanly impossible to make accurate forecast for 30-40years," said Vinayak Chatterjee, chairman, Feedback Infra Pvt Ltd.

A number of private players had bid aggressively for road projects but then sought reset of premia as economic growth fell.

The issue has also been taken up by industry bodies including CII with the government time and again.

The official said the general view in the government is that a special resolution body should be put in place that would renegotiate contracts. 

"The government can spell out parameters on which these contracts can be renegotiated...But a mechanism is the call of the hour for the sector," said the official. 

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