‘Need to amend public-private deal norms to permit re-negotiation’

October 11, 2013



There is scope for more models to build highways.
(There is scope for more models to build highways.)



The Highway Ministry would like provisions in the public-private partnership contracts that allow re-negotiations. For this, it wants the model concession agreement to be amended.

A model concession agreement is the contract between highway developers and National Highways Authority of India (NHAI), which spells out the rights and responsibilities of each party.

The Ministry batted for a flexible concession agreement, which permits the NHAI Board to decide on such issues, since the Board has representation from Secretaries of Highways Ministry, Planning Commission and Expenditure Ministry.

“Public-Private Partnerships (PPPs) are long-term partnerships spread over 20-25 years. No economist can predict correct growth rates for periods beyond three or four years. You don’t know what externalities will crop up in the eco-system of a road project,” said Rohit Singh, Joint Secretary-Highways, speaking at a PHDCCI seminar here on Wednesday.

“There is a distinct need for re-negotiation. Unfortunately, the model concession agreement has a rigid framework, even though it has its strengths. Even for small changes, we have to go to the Cabinet. That takes time and justification at various levels,” said Singh.

This stance comes in the backdrop of Cabinet finalising the modalities of a proposal to permit re-scheduling of premium payments for highway developers, which is basically a type of contract renegotiation. Premium is what developers pay to Government for bagging the rights to build and maintain a highway stretch and collect toll from its users.


Singh also said there is scope to have more PPP models to build highways, depending on the kind of climate.

For instance, there could a hybrid model, where developers get some payment from Government every year and can also collect toll from a highway stretch. In the present annuity model, this is not permitted. Another option could be making concession period a bid parameter.

Singh also said the private sector has not risen to the occasion.

“They bid aggressively looking at short-term profits instead of a long-term partnerships,” he added.

Referring to the private sector taking more debt from banks than Government approved level, Singh said, “We could have specified a certain total project cost. They go to banks to take significantly more than that. I am not saying everybody does it. But there are examples where PPP projects have been implemented with zero equity from the private partner. There is a need to have sincerity on both sides,” Singh said.



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