By Amit Kapoor & Amitabh Kant
As India moves steadily toward its 2047 development goals, building resilient and modern infrastructure remains a critical foundation for inclusive economic growth. Given the sheer scale of investment required, this development hinges significantly on long-term financing outside of the public sector. Over the past two decades, public-private partnerships (PPPs) have emerged as a key instrument to mobilise such capital, enabling transformative projects across roads, airports, ports, and municipal infrastructure. A key ingredient supporting this momentum has been the legal and institutional consistency that underpins investor trust. This legal and institutional alignment has served to strengthen and reinforce the overall credibility of the PPP model.
The legal lens on PPPs
In December 2024, the Supreme Court’s judgment in Noida Toll Bridge Company Ltd v. Federation of NOIDA Residents Welfare Association brought fresh attention to the legal framework governing PPPs. The court held that where a private concessionaire builds infrastructure on land granted by a government agency, the developer is entitled to recover the cost of construction and a “reasonable return”, understood with reference to prevailing bank interest rates at the time of signing contract. Beyond this point, toll collection or user fees must cease, irrespective of the original concession duration.
This interpretation invites a broader discussion. At its core, infrastructure financing requires a stable and predictable framework that assures investors and lenders of enforceable contracts, providing clarity on recovery of capital and sustainable returns over an extended project life. Such confidence is essential to mobilise both domestic and international capital at scale. For example, the National Highways Authority of India is pursuing an ambitious monetisation programme using infrastructure investment trusts, aiming to raise `3.5 lakh crore in the coming five years. These vehicles aggregate toll revenues across road assets, thereby enabling long-term investment based on anticipated user charges and traffic growth over the project lifespan.
Implications for financing and reform
This structure is premised not only on recovery of construction costs, but also on the continued levy of user fees that remain competitive with returns from other financial instruments and alternative asset classes. Importantly, this principle is not confined to national highways; it equally applies to municipal and state-level infrastructure, including urban transport, water supply, and renewable energy. In this context, judicial observations that may be interpreted as suggesting user fees are limited merely to construction recovery plus nominal returns could inadvertently create uncertainty for investors. The key question, thus, is whether such interpretations adequately reflect the commercial models and financial assumptions on which infrastructure projects are designed, structured, and financed today.
It’s also important to consider the implications for the broader PPP architecture. Special purpose vehicles (SPVs), often formed to implement infrastructure concessions, are central to how projects are structured, financed, and ring-fenced from broader risks. The court’s observations on SPV formation without public tender may raise significant questions for ongoing and future projects, many of which follow similar models under established policy frameworks and government guidelines. This could, in practice, create hesitation among private developers and financial institutions who generally rely on a consistent interpretation of contractual norms when committing resources to large, multi-decade projects. It may be useful here to revisit how Indian jurisprudence has evolved in this domain. Since the 1990s, courts have recognised the distinct nature of PPP contracts involving private risk-taking, long-term financing, and investment. In the Nandi Infrastructure Corridor case (1998), the BOOT (build-own-operate-transfer) model was upheld as a valid mechanism, even where land was also provided for township development. In 2006, challenges to airport concessions were not entertained, with the court noting that judicial review does not extend to re-evaluating policy decisions taken by government committees with technical expertise. Similarly, courts have often acknowledged that the balance between public interest and commercial viability requires careful consideration, leaving space for executive agencies to frame flexible solutions tailored to sectoral requirements. In the GIFT City and Production Sharing Contract cases (2013), the court observed that economic policy decisions must be viewed in their administrative context and not judged solely through the lens of audit observations or procedural formality. This general trajectory of judicial deference to executive discretion in economic matters was reaffirmed in 2022, in the Bullet Train Project case, where the court noted that international funding arrangements, such as those by the Japan International Cooperation Agency, should not automatically trigger judicial interference. In this light, the Noida Toll Bridge Company Ltd (NTBCL) decision appears to take a somewhat different approach. It applies provisions of the 1851 Indian Tolls Act; a law designed for projects funded by the government to privately financed concessions. It frames the grant of land as a form of public largesse and characterises the collection of user fees as a quasi-fiscal act. These legal characterisations may not align with how PPPs function in practice, especially when the private partner bears substantial capital risk.
While judicial oversight remains a cornerstone of democratic accountability, given the scale of India’s infrastructure ambition and the role of private capital in delivering it, there may be merit in exploring mechanisms that improve alignment across the judiciary, executive, and legislature. The NTBCL case presents an important opportunity for reflection. It underscores the importance of coherent and forward-looking legal architecture that keeps pace with India’s infrastructure financing needs. While the judgment is now part of the legal landscape, it also opens space for constructive discussion on how best to support the long-term goals of Viksit Bharat. Its implications for investment, financing structures, and institutional reform merit deeper examination; questions that will likely continue to shape the discourse in the months ahead. This is particularly relevant for emerging mega-projects such as the Jewar airport, which hinge on robust revenue projections and land-based concessions. How such ventures navigate legal interpretations of risk, return, and public benefit will be watched closely.
This is the first of a two-part series
The writers are respectively chair, Institute for Competitiveness, and former G20 Sherpa & CEO, NITI Aayog.
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