21 May 2013
Indian infrastructure companies are clamouring for an independent body with authority to alter existing contracts in projects under the Public Private Partnership (PPP) model.
Infrastructure majors and bankers have approached the Prime Minister’s Office and Planning Commission deputy chairman Montek S Ahluwalia to set up an independent PPP renegotiation committee, reports India’s Economic Times newspaper.
"The core of PPPs is risk allocation and when the government is asking the private sector to build infrastructure, they are also transferring a lot of risks like increase in capital cost, operating and maintenance cost and financing cost," said Athar Shahab, chief executive officer at Uniquest Infra Ventures and chair of the roads special interest group in the Confederation of Indian Industry (CII).
"If you have any risk allocation which does not adequately provide for sharp swings or changes, the private sector will say ‘this far and no further’."
"When the economy was growing rapidly, the incongruities in risk allocation were not so obvious," he added. "Now that has changed and many of the problems [are visible] on infrastructure projects."
The body’s decision should be full and final and that only questions over application of law should be taken to court, he said.
In the absence of such a mechanism, the private sector will be wary about getting involved in the government’s ambitious $1 trillion investment plan for infrastructure.
"There needs to be a level play-field that facilitates infrastructure development with a regulatory/adjudicatory framework that protects consumer interest as well as returns to the private sector," said Amit Kapur, partner at J Sagar Associates.