PPP involves a contract between a public sector authority and a private party, in which the private party provides a public service or project and assumes substantial financial, technical and operational risk in the project. In some types of PPP, the cost of using the service is borne exclusively by the users of the service and not by the taxpayer. In other types (notably the private finance initiative), capital investment is made by the private sector on the basis of a contract with government to provide agreed services and the cost of providing the service is borne wholly or in part by the government. Government contributions to a PPP may also be in kind (notably the transfer of existing assets).
In projects that are aimed at creating public goods like in the infrastructure sector, the government may provide a capital subsidy in the form of a one-time grant, so as to make it more attractive to the private investors. In some other cases, the government may support the project by providing revenue subsidies, including tax breaks or by removing guaranteed annual revenues for a fixed time period.
The 15-year history of public-private partnership (PPP) in India is mainly about creating an enabling environment to get private capitalto invest in infrastructure assets. So, a plethora of instrumentalities from model concession agreements, viability gap funding, definitions of infrastructure and specialised financing have focused on asset creation. The happy result is that we now have a fairly large basket of operating assets.
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.
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.
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.
FDC in involved as PPP legal advisory with various Govt & private bodies to resolve the matter arbitrarily or in litigation
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