‘Old wine in new bottles’

0
764

Dear Editor,

The article on the public private partnership [PPP] model for developing infrastructure in India (“Redistributing risks”) in the April issue of India Business Law Journal gives the impression that all is well. I tend to think of the hybrid annuity model as old wine in new bottles, as despite the small changes (some of which are detailed in the article) it is essentially an annuity model with increased subsidies.

Your article fails to mention the biggest hope for risk mitigation in the ensuing legal framework, i.e. the possibility of renegotiation of concessions in certain defined cases. With ₹8 trillion [US$120 billion] of project/bank loans in trouble and waiting to take benefit of this renegotiation, the fate of the initial cases that are renegotiated would determine the future of BOT [build-operate-transfer] investors and investments.

Resolving this would require an understanding of commercial, technical and legal issues of the troubled projects from inception. As such, the stakeholders (the government or investors or lenders) would need a new breed of advisers who have an inter-disciplinary knowledge of techno, commercial and legal aspects of project development and financing. In short, dispute resolution will no longer require the involvement of just litigating lawyers, or accountants, or engineering consultancy firms.

If the dispute cannot be resolved amicably, the project will have to be liquidated under the ensuing bankruptcy law which again requires insolvency professionals.

The potential to renegotiate and revisit a concession arises from the report of the Kelkar Committee [on revisiting and revitalizing the PPP model of infrastructure]. It would radically alter dispute resolution in this country, transforming it from a purely legal process to a commercially and technically nuanced negotiation and would call for a new set of professionals who are inter-disciplinary (techno, legal, commercial focus in infrastructure domain). Conventional judges or lawyers would not be suitable to head the PPP review committee (which would hear renegotiation in the first stage) or even the PPP Appellate Tribunal. The final decision to restructure a concession will need to be equitable and also commercially viable.

As for the National Highways Authority of India’s commitments to acquire 20% of the land and approvals (as mentioned in the article) – this is not new. The concession agreement should be amended to give BOT developers the right to quit the project on predetermined reasonable terms if NHAI fails to deliver on its promises. This will make the project truly commercial.

A Balasubramanian
Of Counsel
J Sagar Associates
Chennai