Renegotiating contracts terms with the private sector may be a difficult task for people in the Government.
But, as the Government is increasingly depending on the private sector to develop infrastructure such as roads and ports, it may now have to devise mechanisms to permit contract renegotiations, said experts at a FICCI conference on public-private partnerships (PPP).
Globally, most projects undertaken on PPP basis have to be renegotiated, said Onno Ruhl, Country Director, India, World Bank. He said a study of about 1,000 PPP projects undertaken across the world during 1985-2000 showed that 30 per cent of projects had to be renegotiated.
Cases of renegotiation were higher in sectors such as transport, water and sanitation sectors.
“In the transport sector, 55 per cent of (PPP) contracts were renegotiated…. More so in water and sanitation, where 75 per cent of contracts were renegotiated,” said Ruhl.
“I don’t think anybody has the ability to write contract for 20-30 years. But the challenge is to renegotiate in a transparent and equitable manner,” he said and added that the cost of non-adjustment could be very high.
With many highway developers approaching the National Highways Authority of India (NHAI) to reschedule their premium payment to Government, Highways Secretary Vijay Chhibber said an institutional mechanism, like a highway regulator, which functions at arm’s length from both National Highways Authority of India (NHAI) and private developers, might be the answer.
Earlier, Economic Affairs Secretary Arvind Mayaram said there was a need to create more regulatory authorities independent of Government entities to fast-track PPP projects. The Government has already announced setting up of new regulators for the coal and road sectors as well as a tariff regulator for the railways.