The last mile issues in relation to private sector investment in the road and port sector relate to the concession agreement, which are yet to be finalised. In the road sector, the concession agreement has been through several drafts, but none to the satisfaction of the private sector. The road concession agreement signed for the Jaipur Kishanganj section of the National Highway will be the model agreement to be used for all BoT projects of the National Highways Authority of India. The document released on the 28th of December last year was to be treated as the final agreement. However, since the private sector bidders, especially L&T and Reliance Industries (the shortlisted bidders for Jaipur Kishanganj) had some reservations, the NHAI is looking intothe issue. Some of the unresolved last mile issues are the six-laning option that the promoter has to make a call on after the first five years of operating the four lane expressway and the escalation clause for the toll.

If the promoter chooses not to the take the six laning option, the 18 year concession agreement will be reduced to nine years. This has made it very difficult for the promoter to estimate the financial viability of the project. Also, his decision to six-lane will depend on wether there is sufficient traffic build up to justify the investment. But according to private sector promoters, as things stand now, they have to make a call on the six laning right now - a difficult proposition. Repeated discussions have failed to throw up a solution to the problem.

The concession document has however been declared as bankable by the financial institutions. Force majeure has been adequately covered, so if due diligence indicates a profitable proposition, the funding will be made available.In thecase of ports, IDFC has already submitted their recommendations for a model concession agreement. It has drawn heavily from the agreement signed between P&O Ports, Australia and the Jawaharlal Nehru Port, Mumbai. The ministry of surface transport is yet to decide the issue. However, a model concession agreement in ports will relate only to private sector project being executed in Major Ports. Minor ports, which is expected to see very high levels of investment like in Gujarat, is a state subject. States like Maharashtra and Gujarat issued policy guidelines on minor ports as early as three years ago.

In the last year, Andhra Pradesh have drawn up ambitious port plans. Although they failed to rope in Reliance Industries for the Krishnapatnam project, International Seaports is constructing a mega port at Kakinada. However, the model agreement from the Centre will however determine issues like dollar denominated tariff (this was denied to P&O's private terminal in JNP). Kandla's container terminal (again tobe developed by P&O) may become the first project to be executed under the model port concession agreement.