New Delhi: The government is considering the introduction of a force majeure clause in public-private partnership projects to allow renegotiation of contracts to revive private participation in infrastructure development and salvage some big-ticket projects.
The Planning Commission has proposed adding a provision for renegotiation in PPP contracts, including existing projects, to deal with unforeseen developments in a draft note sent to concerned ministries. ET has reviewed the note.
A large number of existing infrastructure projects in sectors such as highways, power, airports and ports have run into rough weather because of unforeseen circumstances, and the lack of provision for renegotiating the contracts has made them unviable for investors. This year GMR and GVK walked out of mega-highway projects worth Rs 10,700 crore, while most recently Reliance Infrastructure pulled out of the Rs 5,800-crore Airport Express line of the Delhi Metro. There are problems brewing in the Gurgaon Expressway project, while Tata Power and Reliance Power are struggling to transform their ultra-mega power projects powered by imported coal into profit-making ventures due to changes in input costs.
Private developers have been demanding a renegotiation provision in PPP contracts because they cannot foresee all the events and contingencies during the entire contract period, which is typically 20 years or more. The government has targeted to attract at least half of the $1-trillion investment envisaged in the infrastructure sector during the 12th plan period (2012-17) from the private sector.
14/10/13 Yogima Seth Sharma/Economic Times
To Read the News in full at Source, Click the Headline
The Planning Commission has proposed adding a provision for renegotiation in PPP contracts, including existing projects, to deal with unforeseen developments in a draft note sent to concerned ministries. ET has reviewed the note.
A large number of existing infrastructure projects in sectors such as highways, power, airports and ports have run into rough weather because of unforeseen circumstances, and the lack of provision for renegotiating the contracts has made them unviable for investors. This year GMR and GVK walked out of mega-highway projects worth Rs 10,700 crore, while most recently Reliance Infrastructure pulled out of the Rs 5,800-crore Airport Express line of the Delhi Metro. There are problems brewing in the Gurgaon Expressway project, while Tata Power and Reliance Power are struggling to transform their ultra-mega power projects powered by imported coal into profit-making ventures due to changes in input costs.
Private developers have been demanding a renegotiation provision in PPP contracts because they cannot foresee all the events and contingencies during the entire contract period, which is typically 20 years or more. The government has targeted to attract at least half of the $1-trillion investment envisaged in the infrastructure sector during the 12th plan period (2012-17) from the private sector.
14/10/13 Yogima Seth Sharma/Economic Times
