The government Thursday tasked the Planning Commission with formulating a draft bill on dispute resolution in public contracts in consultation with all ministrieS.
According to the Prime Minister's Office (PMO), with rapid expansion of public private partnerships (PPP) which have attracted crores of worth of investment in different sectors, dispute resolution in large public contracts has become a growing concern.
"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 the obligations of project authorities," the PMO said in a statement.
"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."
The PMO said that 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.
"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."
The PMO added that there are a few hundreds PPP contracts already in operation and more are being signed on a fairly rapid pace, as a result of this expansion, contractual disputes have been rising steadily and it has become essential to consider an institutional arrangement that would address such disputes expeditiously and at reasonable costs.
"It is in the interests of all concerned to set up an institutional mechanism that can provide assurance of speedy resolution of disputes, especially in respect of large public contracts," the statement added.
