 "Manmohan Singh")
Prime Minister Manmohan Singh has asked the Planning Commission to formulate a draft Bill on resolving disputes in public contracts to release capital due to these rows in public-private partnership (PPP) projects. The Bill will also aim at removing uneasiness among private players about obligation of project authorities.
“Dispute resolution in large public contracts is an area of growing concern and the prime minister has initiated the first steps in improving the institutional arrangement for dispute settlement,” a statement from the Prime Minister's Office (PMO) said.
Following the rapid expansion of PPP, there are concerns about the dispute resolution mechanisms in place. There is a certain dissatisfaction among private sector participants arising from the responses they receive from project authorities about their obligations.
Most concession agreements specify the obligations of project authorities, along with timelines for fulfilling such obligations. Whenever some of these obligations are not fulfilled, projects get delayed, which in turn increases project costs and reduces the returns.
Private sector entities often find it difficult to enforce their contractual rights and tend to stop short of claiming damages due to them for fear of antagonising project authorities. The ultimate recourse available to the private sector participants is only arbitration, as provided in the contract.
Given the current state of arbitration in India and the likelihood of arbitral awards being challenged in courts, project developers face a long process which imposes a heavy burden on them, the statement said.
Large amounts of capital get locked up in disputes, restricting growth and the ability of entrepreneurs to use it fruitfully. Further, developers factor these delays into their costs, thus pushing up project costs.
“It has now become essential to consider an institutional arrangement that would address such disputes expeditiously and at reasonable costs,” the PMO said.
The Planning Commission will conceptualise this further and present a draft bill for consideration of the government.
According to the Finance Ministry site, there have been 758 PPP projects where a contract has been awarded and projects are underway. The total project cost is estimated to be about Rs. 3,83,332.06 crore.
The 12th Plan (2012-13 to 2016-17) envisaged one trillion dollars (bit over Rs 56 lakh crore) of investment in infrastructure, half of which is expected to come from the private sector, including PPP projects.
