Govt likely to revisit existing public-private model contract

Written by fe Bureau | New Delhi | Updated: Feb 28 2013, 10:34am hrs
The government may review the existing public-private partnership (PPP) model contract for infrastructure development to ensure a more rational distribution of role and responsibilities between private and public sector companies.

The Economic Survey 2012-13 underlines the need for re-allocating responsibilities between public and private sector players on the basis of their strengths.

For example, the private sector is known for its high operational efficiency and robust risk assessment skills while the government sector for serving public purpose. The roles and responsibilities should also be allocated accordingly.

Global experience indicates that PPPs work well when they combine the efficiency and risk assessment of the private sector with the public purpose of the government sector. They work poorly when they rely on the efficiency and risk assessment of the government sector and the public purpose of the private sector. India should be careful not to undertake PPPs that do not apportion risks and responsibilities sensibly, the survey said.

The government could also insert additional contractual provisions to allow cancellation of contract and re-bidding in case the private party under-performs.

Flexibility needs to be built into arrangements so that the contract can be withdrawn and put up for re-bid when the private party under performs, the document said.

The government is also looking at setting up an agency to train central and state-level officials in renegotiating troubled PPA contracts.

The government has envisaged to double its infrastructure sector spending to $1 trillion during the current 12th five-year Plan (April 2012- March 2017). With the government banking on the private sector for 48% of targeted investment, arranging the requisite funds is going to be a big challenge considering the slowing inflows of foreign funds in recent months.

But the government hopes that India Infrastructure Finance Company (IIFCL) will be able to leverage its sovereign status to help private developers mobilise necessary funding.