dea ppp criticality legal(1)

7/27/2019 Dea Ppp Criticality Legal(1)

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Government of India

Ministry of Finance

Department of Economic Affairs


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Government of India

Ministry of Finance

Department of Economic Affairs


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KledgeSeriesii

Thisdcumethasbeepreparedtrecrdaddissemiatethepsitipapersadprceedigsfthehigh-levelplicyrkshpcriticalityflegalissuesadctractsfrpublicprivateparterships,hichasrgaisedbyDepartmetfEcmicAffairsicllabratiiththeAsiaDevelpmetBakDecember8-9i2008,neDelhi,Idia.npartfthisdcumetmaybereplicated,qutedrpritedithutrittecfirmatifrmDepartmetfEcmicAffairs,MiistryfFiace,GvermetfIdia.

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CriticalityfLegalIssues&CtractsfrPublicPrivatePartershipsiii

Foreword

A sustaied grth f the Idia ecmy is critical fr equitable develpmet ithe cutry hich ca impact all strata f sciety. The requiremet fr sustaiableifrastructuredevelpmetisparamutbthtprvidethebackbefrecmicactivitiesaselltesurethatresurcesarecservedadusedmstefficietly.

PublicprivatepartershipsrPPPsareseethaveasigificatrleibrigigimucheededivestmetsasellasefficieciesiutilisatiadmaagemetfresurces.Varius estimates pit t the fact that if the ecmy has t gr at 8 percetperaum,ver$500billifivestmetiseededfrtheifrastructuresectrsbetee2007-2012.Givethelimitatisfpublicivestmetarud30percetfthisrequiremetiseededtcmefrmprivatecapital.

TheGvermetfIdiahas,therefre,beeflligacsideredapprachtcreatetheeabligevirmetfrcatalysigsuchprivateivestmetadperatisitallifrastructuresectrs.SupprtedbytheAsiaDevelpmetBak,aPPPIitiativehasbeetargetedcapacitybuildigadistitutialisatifPPPsacrssthecutry.UderthisIitiative,aumberfcapacitybuildigrkshps,tfcuskeyissues,havebeecductedacrssthecutry.

Thelegalevirmet-geeralcutryide,statespecificlegislatifrifrastructureadPPPs,ad,prjectspecificctracts-frPPPsisefthemstcriticalaspectshichillgverattractiveessfifrastructuresectrsadprjectsttheprivatesectr.Itisalsfudametallyimprtatthatgvermetprjectspsragecies,hetherlcalgvermetsrthers,havesufficietaareessfkeylegaladctractualissuessthatprjectsareellstructured,ctracted,implemetedadmitred-thekeyrlefgvermetiPPPs.

Therkshpas,thus,develpedtraiseaareesstheseissuesfrgvermetfficials, especially thse respsible fr develpig PPP prjects. Legal firms ith a

ealthfPPPlegislativeadprjectspecificexperiecefrmbthIdiaadverseasereivitedtdissemiatetheirkledgeasellasegageiiteractisiththegvermet fficials. Trasacti advisry ad private sectr firms als participatedt prvide their perspectives the key legal ad ctractual issues facig thePPP prjects curretly uderay. The rkshp as ell atteded ith ver80participatsaditesseditesedeliberatisamgstfficialsadspeakershichisleadigtctiuediteractisbeteestatePPPcells,DepartmetfEcmicAffairsadtheADBtdevelpadehacePPPprgrams.

TheADB-GvermetfIdiaPPPIitiativeisbeigmaagedjitlybyPPPfcalpitsattheDepartmetfEcmicAffairs,MiistryfFiaceadatADBithumerus

PPPcellsudertakigcsiderableactivitiesacrssthecutry.ThisreprtispartfaseriesfreprtsaimedatcapturigtheseeffrtsfthecellsadthisIitiative.wehpe


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thatthekledgethusdissemiatedillbefusetgvermetfficialsacrssthecutryidevelpigPPPsitheirStatesadsectrs.

we are cfidet that these effrts ill lead t sustaied imprvemet i thePPP climate fr ifrastructure develpmet i the cutry ad ur edeavr is tctiuetheseeffrts.

Govind Mohan

JitSecretaryDepartmetfEcmicAffairs

MiistryfFiaceGvermetfIdia

Anouj Mehta

SeirIfrastructureFiaceSpecialistFcalPitfrPPPs(Idia)

AsiaDevelpmetBak


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CriticalityfLegalIssues&CtractsfrPublicPrivatePartershipsv

ADB AsiaDevelpmetBak

ADR AlterativeDisputeResluti

BLT BuildLeaseadTrasfer

Boo Buildooperate

BooT BuildooperateTrasfer

BoT BuildoperateadTrasfer

BPo BusiessPrcessoutsurcig

BRoT BuildRetoperateTrasfer

BT BuildadTrasfer

BTo BuildTrasferoperate

CAo CtractAddoperate

CPI CsumerPriceIdex

DBFo DesigBuildFiaceoperate

DEA DepartmetfEcmicAffairs(Idia)

DoT DevelpoperateadTrasfer

DRB DisputeReslutiBard

EoI ExpressifIterest

EPC EgieerigPrcuremetadCstructi

FDI FreigDirectIvestmet

FM FacilitiesMaagemet

GDP GrssDmesticPrduct

GoI GvermetfIdia

IIFCL IdiaIfrastructureFiacigCmpayLimited

IIPDF IdiaIfrastructurePrjectDevelpmetFud

ITn Ivitatitnegtiate

ITT IvitatitTeder

Abbreviations


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MoF MiistryfFiace

Moo Mderiseooperate

MoT MderiseoperateTrasfer

nGo nGvermetalorgaisati

o&M operatiadMaiteacePFI PrivateFiaceIitiative

PPP PublicPrivatePartership

PPPAC PublicPrivatePartershipApprvalCmmittee

PQ PreQualificati

PQQ PreQualificatiQuestiaire

PSP PrivateSectrParticipati

Q&A QuestiadAserR&M RefurbishmetadMaiteace

RFP RequestfrPrpsal

RFQ RequestfrQualificati

RPI RetailPriceIdex

SC SupremeCurt

SPV SpecialPurpseVehicle

Un Uitednatis

UoI UifIdia

US UitedStates

VFM ValuefrMey

VGF ViabilityGapFudig

wTo wrldTradeorgaisati


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CriticalityfLegalIssues&CtractsfrPublicPrivatePartershipsvii

UdertheiitiativefMaistreamigPPPsiIdia,DepartmetfEcmicAffairs,GvermetfIdia,ithsupprtfrmtheAsiaDevelpmetBakisspearheadigcapacitybuildigadeffectiveistitutialisatifPPPCellstdelivertheirmadateattheCetreadStatelevel.

Aumberfsectriitiatives havebee develped,aimedatexperiecesharigadkledgedissemiati.AcriticalareafattetihasbeethectractsfrPPPs.Ctractsuderliethearragemetbetee thepublicad the privateetitiesiaPPPprject,adfrmthebasisfdeliveryfservicesttheusers.Hece,DepartmetfEcmicAffairsicllabratiithAsiaDevelpmetBakrgaisedahighlevelplicyrkshpcriticalityflegalissuesadctractsiDecember,2008.natialaditeratiallegalfirmssharedtheirexperiecesadperspectivesvariusfactsfthesubject.

wearegratefulttheexpertsfrmthelegalfirms,hsharedtheirexperiecesadkledgethrughthepsitipapersadkeptthedeliberatifrkshpicisiveadifrmative.Theteamsfrmthefivelegalfirmsereledby:

AmitKapur,SeirParter,J.SagarAssciatesMattheBubb,Parter,Ashurst

IsabelEvasadCliHall,Bird&Bird

TyHllad,HeadfFiace,DLAPiper

K.Rattay,whiteadCase

The deliberatis ad the utcme f the rkshp ere eriched by the isightsprvidedbythegvermetfuctiariesegagedidevelpigPPPsitheirrespectivesectrs,therepresetativefthetrasactiadvisryfirmsadtheprivatesectrfirms,hparticipatedithet-dayrkshp.

The Asia Develpmet Bak, particularly Mr Ashk Sharma, Directr, SAFM adMrAujMehta,SeirIfrastructureSpecialistadPPPndalfficerfrIdiaiADBhelpeduscceptualisetheprgrammeadseamlesslyitegratethevariusperspectivesadpsitipapersitauifiedhle.wearegratefultthemadtheirteamfrtheirctiuedsupprt.

Thereprthasbee editedadpreparedbya team csistigfMrs AparaBhatia,Directr,PPPCelladMrPrashatBhardaj,MISExpertPPPCellfrmtheDepartmetf Ecmic Affairs ad Mr Auj Mehta, Seir Ifrastructure Specialist, adMrK.Purushttam,CsultatfrmAsiaDevelpmetBak.wehpethatthereprtuldleadtgreaterclarityaduderstadigfthecreissuesflegalctractsad

eabledevelpmetfrbustPPPprjectsithecutry.

i.ii.

iii.

iv.

v.

Acknowledgement


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CriticalityfLegalIssues&CtractsfrPublicPrivateParterships

Foreword iii

Abbreviations v

Acknowledgement vii

Contents ix

Reprtovervie 1

PsitiPapers 5

1. CtractsiPublicPrivatePartershipsfrIfrastructure 7 Develpmet:ALegalPerspective -byAmitKapur,J.SagarAssciates

2. PPPsTheAsiaCtet 77 -byHarveyHeaveCucil,Ashrust

3. RiskPerspectivefaGvermetSpsr 91 -byTyHlladadGurmeetKaur,DLAPiper

4. AchievigCsumerPrtectiiPPPs 115 -byK.Rattay,whiteadCase

Aexures 119

1. IteratialPPPs:CaseStudiesadLesssLeart 121Bird&Bird

2. TheRlefCtractsiPPPs:optimisigPublicServiceiPPPMdeSettigtheTebyAmitKapur,Parter,JSA 127

3. StructurigfCtracts:CcessisfrPPPs:VishuP.Sudarsha,Parter,JSA 131

4. PrcurigaPPP:AmitabhSharma,Parter,JSA 138

5. CaseStudyDelhiPrivatisatiadJudgemets:MasrAliShket,Parter,JSA 147

6. CaseStudynathpaJhakriHydr-electricPrject:Dhiredranegi,Parter,JSA 153

7. CaseStudySigapreIstitutefTechicalEducati:Ashurst 160

ConTEnTSConTEnTS


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8. RiskPerspectivesPrivateSectrSupplieradFiaciers:IsabelEvas,Bird&Bird 165

9. CtrastsBeteeTraditialadPPP/PFIPrcuremetCtracts:CliHall,Bird&Bird 172

10.KeyCtacts 176

Figures

Figure1:Evlutifthegverigframerk 11

Figure2:Gverace-regulaticmpact 23

Figure3:Perprjectstructure 59

Figure4:Telecmprjectstructure 59

Figure5:Stepsfrallcatigrisks 94

Figure6:Typicalprjectstructure 95

TablesTable1: PPPprjectsiIdiaifrastructure:Valuefctracts 14

Table2: PPPprjectsiIdiaifrastructure:Ctractsaarded 15

Table3: FacetsfefficacyfADR 41

Table4: Smefrmats:Rleallcati 58

Table5: AttributesecessarytsucceediPPP 58

Table6: Skill-seteededteffectivelyadmiisteradimplemetPPP 58

Table7: LegislativepersfCeterStates 60

Table8: PPPlasiAdhraPradesh,GujaratadPujab 61

Table9: Illustratifiputadutputbasedspeechvalue 92

Table10:CmparativeaalysisfkeyctractualissuesiPPPprjects105iEgladadVictria,Australia

Bxes

Bx1:RecmmedatisitheDeepakParekhCmmitteereprt 12

Bx2:Factrstcsider 94

CaseStudies

CaseStudy1:Clearlydefiedctracts 121

CaseStudy2:Regialatercmpay 122

CaseStudy3:Uderstadigprjectrisks 122

CaseStudy4:Rightcmmercialmdelfrservice/ccessiagreemet 123

CaseStudy5:Develpigivativeslutistmeetprjectrequiremets 124


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REPoRToVERVIEw


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CriticalityfLegalIssues&CtractsfrPublicPrivateParterships3

The wrkshp Criticality f Legal issues ad Ctracts fr Public PrivateParterships (PPPs)aimed at dissemiatig legal aspectsf PPPs bth fr PPP plicymakersatgvermetlevelsasellasfrgvermetalprjectspsrs.DebatigiteratialPPPexperiecesadlesssasregardedascritical.Therkshpas,therefre,desigedtbeledbyaleadigdmesticlafirmithstrgPPPexperieceadcmplemetedbyseveraliteratiallafirms,dissemiatigtheirexperieces

differetissues.Thereprtis,therefre,acllatiftheseissuesdiscussedaddebatedattherkshp.Eachspeakerrfirmasaskedtprvideapsitipaperthesubjectmatterhichisicludedithisreprt.Slidespresetedattherkshphavealsbeeicludedithisreprtastheyaddsubstatiallytthereprtsithcasestudies.

J.SagarAssciatesprvidedthemaithrustfdiscussisiththeirpresetatislegalperspectivesctractsiPPPsfrifrastructuredevelpmet.Thetpicsicludedptis ad prcuremet i PPP, rle ad respsibilities f stakehlders, regulatryad plicy framerk, fudametal priciples gverig ctractig i Idia, evlvigjurisprudeceregardigPPPiifrastructureprjectsadrisk/reardissuesictract

structurigadegtiati.StateisePPPlegislatisiIdiaerealsdiscussed.TheJSagarpresetatiadpsitipapertesdescribedthedifferigmdelsadapprachesadptedbydifferetcutriesfrstructurig,prcurigadimplemetigPPPPrjectsadstressesevlvigadyamicIdia-specificmdelbaseditsexperieces.Settigupaefficiet,timebud,fairadcredibledisputereslutimechaismhasals bee recmmeded. Presetatis ere made t emphasise certai issues ithillustratisfrmprjectscasestudiesicludig:

PPPprcuremet-theTirupurwateradwasteaterCase

Pstclsureaspects-DelhiPrivatisatiCase

Disputereslutiaspects-nathpaJhakriHydrElectricCase

TheAshurstpresetatiadpsitipaperfcusedAsiaexperiecesithPPPsadalsexplredtheSigapreITECllegewestPPPcasestudy.overviesfPPP,stagesfPPPadptiaddevelpmet,statusfdcumetati/relevatlegislatietc.,iSigapre,SuthKrea,adJapaalgithexamplesfrecet/curretPPPdealsiVietam,Idesia,PakistaadPhilippieserepreseted.ThepresetatiutliedthekeychallegefrAsiacutriesbeigifidigaayftakigthesuccessesadapplyigthekeylesssleartttheirjurisdicti.

PrivatesectrriskperspectivesadthectrastbeteetraditialadPPPrPFIprcuremet ere preseted by Bird ad Bird hich emphasised the ecessity fr

recgisigculturaldifferecesbeteetraditialadthePPP/PFIrutes.

Report Overview


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Thepresetatiriskperspectivesfrmagvermetspsrpitfvie,ledbyDLAPiper,stressedupthecmplexityfPPPprjectshichrequiredgvermetspsrstestablishdedicatedteamsfrruigprcuremetadPPPprcesses,ad,develpabdyflearigfruseifutureprjects.

whiteadCaselafirmfcusedachievigcsumerprtectiiPPPshichbrughtuttheeedfresurigadequateprtectitcsumersthrughlegislati,

ivlvemetfidepedetregulatrsadctractualarragemets.

ThesepapersarecllatedithisreprthichisitededtbecmeareferecematerialfrallthegvermetPPPcellshetheratcetralrstatelevelsadillassistiguidigdevelpmetfPPPpliciesadprcessesatstate,sectrrprjectlevel.

Allifrmatiadpiiexpressedithepsitipapersarelyftheauthrs.


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PoSITIonPAPERS


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ConTEnTS

1. CtractsiPublicPrivatePartershipsfrIfrastructureDevelpmet: 7

ALegalPerspective

-byAmitKapur,J.SagarAssciates

2. PPPsTheAsiaCtet 77

-byHarveyHeaveCucil,Ashrust

3. RiskPerspectivefaGvermetSpsr 91

-byTyHlladadGurmeetKaur,DLAPiper

4. AchievigCsumerPrtectiiPPPs 115

-byK.Rattay,whiteadCase


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Executive Summary

1. TheeedfrPublicPrivatePartershipitheIdiaifrastructuresectrhasbeeell recgised by theGvermet f Idia ad thesteps take t ecuragePublicPrivatePartershipsareprmisig.Suchstepsiclude:

stadardisig ctractual dcumets as sectr specific Mdel Ctracts/

CcessiAgreemets;stadardisigbiddigdcumets;

establishig istitutial mechaism like the Idia Ifrastructure FiaceCmpayLimitedtfacilitateifrastructuredevelpmetadPPP;

creatigtheIdiaIfrastructureDevelpmetFud;

relaxigtherestrictisfreigdirectivestmetimstifrastructuresectrs;ad

fiscalIcetivesicludigtheIcmeTaxAct,1961adstatelastdevelpersadledersfIfrastructurePrjects.

2. Suchstepsareparticularlyrelevati thectextf givethe Idias estimatedivestmet eed i the ifrastructure sectr. The Ecmic Survey f Idia(February2008)estimatesthatvertheextfiveyears,theivestmeteedsiphysicalifrastructureillbeatUS$500billi,hereitheshareftheprivatesectrisprjectedatUS$150.4billi(30.07percet).

3. Ttheuiitiatedthegverigframerksfthevariusifrastructuresectrsmightappeartbemazefistitutialstructures,arragemets,rights,bligatisadduties.Hever,heelkbeydthefrmalstructuresacrucialpitfteisthatparties(bthprivateadpublic)arefreeteteritvalidadefrceablecmmercialarragemetsslgastheirbusiessarragemetsare

cmpliatith:

therulesfetry(frexamplethseregardigfreigdirectivestmet),ad

therulesfthegamefrdigbusiessitheidustryccered.

a.

b.

c.

d.

e.

f.

a.

b.

1Contracts in PublicPrivate Partnerships forInfrastructure Development:A Legal Perspective

ThisPaperhasbeedevelpedbythePrjects,RegulatryadPlicyPracticefJ.SagarAssciatesadslicitrsithctributisfrmAmitKapur,SeirParter:[[email protected]];Dhiredranegi,

Parter:[[email protected]];VishuSudarsa,Parter:[[email protected]];AmitabhSharma,Parter:[[email protected]],adMasrAliShket,Parter:[[email protected]].


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4. Suchcmmercialarragemets,iclude:

Ivestmet arragemets by private participats ith the cceredgvermetalistrumetalityastheGratrfCcessirJitVetureParterrPricipal;

Arragemetsfrparterigrcllabratiiveturesbetee2rmreperss icludig icrprati f specific etities ith the rules fr their

fuctiig;

Ctractsfrallrayftheflligcmpets/elemets-salersupplyfgds,servicesritellectualprpertyrights-icludigbusiessprcessutsurcig (BPo), Egieerig Prcuremet ad Cstructi (EPC),operatis ad Maiteace (o&M), Refurbishmet ad Mderisati(R&M);

Ctractspermittigtheusefcertaiassets,facilitiesadrightslikeleases,liceces,ccessis;ad

Ctracts fr fiacig arragemets hich culd vary i cmplexity adsphisticatifrmasaleadpurchasefmilkraespapereverymrigta30yearperpurchaseagreemetrccessitbuild,perateadtrasferaairprt.

5. Frmtheperspectiveftheatialecmy,theiterplaybeteethefrmalregulatrystructuresadtheresidualctractualfreedmisdesigedt:

prvide suitable icetives fr such cmmercial activities ad ecmiceterprisethatbestservetheatialiterest;

prvide a facilitative busiess evirmet fr stakehlders t trasactbusiess,ithsuitablerisk-allcatiadsafeguards;

safeguardscarceresurcesadstrategicatialiterests;ad

eabletheelfarebjectivesfthestateadecmicbjectivesfprivateetrepreeurstbesuccessfullymarried.

6. Thispaperisdesigedtexplrethestructurigftherelatishipbeteethepublicsectradtheprivatesectriifrastructureprjects-bthitermsfregulatryadctractualmechaisms.

7. Smesalietaspectscabesummarisedtbe:

Thelegal-regulatry-plicyframerkfrPPPs:

Theframerkshuldtbeprescriptiverrigidbutbeflexiblet

accmmdatediversefrmatsfPPP-aspertheeedsfthesectrasalspeculiarities/specificsfaprject;

Theframerkmustprvidefrstrikigasustaiablebalacebeteeuiversalservicerlife-liesupply,adcmmercialviabilityfthesectr.Primeexamplesfthisare:

TubigParaSaBaragayprgramftheMailawaterCmpay(Philippies);

Rural telephy ad electricity supply i Bagladesh: GramiTelephes.

These prjects are characterised by their beig iclusive fr prersectisfthecmmuityithlargeclustersflicmefamiliesad

a.

b.

c.

d.

e.

a.

b.

c.

d.

A.

i.

ii.

a.

b.


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illegalcectis.Theyhavebeesuccessfuliprvidigaffrdableadreliablesupplythrughgreaterdegreefcmmuityparticipatilikethelcalresidetselfareassciatis,resultigisigificatefficiecygaisadblsterigviabilityftheprject.

B. The chice f the frmat fr PPP shuld be decided by the cceredgvermetalauthrityafterevaluatigfactrssuchas:

felt eed fr a particular ifrastructure facility hich determies theutput/perfrmaceparameters;

felteedfrprivateparticipatiithedevelpmetadperatifthatfacilityicludigthevaluefrmeyprpsiti;

mstefficietayfdevelpigadperatigthatfacility;ad

balacebeteeviability,elfarebjectivesadpublicplicyeeds.

C. Aclearlegislativeadregulatryfudatieabligthepublicetities/utilitiesteteritsuchctractsadarragemetsisdesirable,iparticulartsecure:

A trasparet ad bjective prcess fr selecti f ifrastructureprjectstakigitcsideraticcessiaireccersabutvaluefrmeyadelfarecsiderati.Idigs,theprcessdesigmustbecsistetiththegverigframerkfrpublicprcuremet;

A clearly defied apprval, cmpliace ad perfrmace mitrigjurisdicti. This is especiallyrelevat irelati ttherightsf lcaladtherauthritiessuchastheDevelpmetAuthrities,MuicipalAuthritiesadPachayats;

Acleardefiitiftherle,respsibilityadrightsfvariuspartiesi the gverig istrumets icludig the scpe f public service,

service stadards, pricig, adscpe f gvermetal iterveti rassistace;

Theparticipatifprivatepartiesiershipad/rmaagemetfpublicassetsad/rdeliveryfpublicutilityservices;

Thevestigisuchprivateparty,thepert:

cllect, retai ad apprpriate reveue t meet reasableexpesesicurrediimplemetatifthePPPprjecticludigapre-determied/agreedreturthefudsemplyed;ad

seek revisi f the charges ad/r cllecti i terms f the

ccessiagreemet,irdertfacilitatebusiessplaigadfiacig.

vi. The rle f the Ccessiaire i maitaiig ad maagig the PPPasset/servicesadictrlligaccesstadusageftheifrastructurefacility;ad

vii. The scpefbakabilityadsecuritisatif the Ccessi,PrjectAssetsadreveue(icludigassigability)sthattheCcessiaireisiapsititavailaffrdabledebtfiacebysecurigleders.

D. wheegagigiththeprivatesectritmustbebreimidthat:

Aprivateetrepreeurisiterestediudertakigtheprjecttruasuccessfulbusiesseterpriseadearprfits.Assuch,theprjectmust

i.

ii.

iii.

iv.

i.

ii.

iii.

iv.

v.

a.

b.

i.


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meetthethreshldtestffiacialviabilitybasedrealisticassumptis.Thisisparticularlyvitalfresurigbakabilityftheprject,i.e.,abilityfthedevelpertarragefrcsteffectivefiacethestregthftheprjectsreveuestreamadtheprjectagreemets;

A private etrepreeur brigs i efficiecy i peratis, fiace adtechlgycmmesuratetthereardsassuredfrrisktake.Shuld

theprjectbeperceivedtbetrisky,theprjectmayfailtelicititerestfrmtheprivatesectr;

Aprivateetrepreeurhasfudstputitsupprtgvermetselfare schemes like free per uless the same cstitutes a cash-flhichcabefudediasustaiablemaerfrmtheprjectsreveuestreamaftermeetigallreasableexpedituresicurredasalsrecverigareasablereturivestmetcmmesuratettheriskprfileftheprject;

Imprperrufairriskallcatiivariablyehacesriskprfileftheprjectadill:

detercredibleplayershishtdeliverqualityifrastructurefacilities.

attractthseplayershrkccessicaptureadshrttermprfiteerigbusiessmdel.

v. Auviablepublicifrastructureprjectisttheprblemftheprivateetrepreeuraleadcaifactemergeasaseriusreputatialriskadprblemfrthegvermetalauthrities;

vi. Public prcuremet prcess fr PPP must t be rieted t realiseidfallgaisfrthegvermetalauthrityithutfrtladigthe

prjecttbecmeuviablerburdesmefrcsumers;advii. whedesigigacmmercialstructurefrudertakigayifrastructure

prjectiaPublicPrivatePartershipfrmat,itisessetialtcsidertheiterplaybeteetheregulatryframerkadthevarietyfptisavailable tparties.Fr Public Private Parterships tbe effective itermsfattractigprivatesectrivestmetadprvidigfrtheeedsfcitizes/usersthePartershipmusttakeitcsideratitheeedsfallkeystakehldersicludig:thecitize/user,thedevelperadtheState.Idigsecabuildthepastachievemetsadctiuetdevelpadyamic,IdiaspecificmdelfPublicPrivatePartershipstructurig,prcuremetadctractig.

1. Introduction

1.1 The rlesplayed by statead by private eterprise respectivelyi ecmicactivitiesadtheiriter-serelatishiphasvariedvertime-asadirectutcmeftheprevaletmacrecmicpliciesftheGvermet.Itisterthythatstesiblythebjectiveshaveremaiedthesame-ecmicgrth,maximisigallcativeefficieciesfresurces,adelfare-thughtheplicydecisifhtstructuretheactivityvariesfrmtimettime.Thesceariithe20thceturyIdiaculdbesummarisedassetutbel:

Pre-idepedeceIdiaStatessacmmerce,tradeadeterpriseflurishithehadsfprivateetrepreeurs(icludigtheEastIdiaC.).Statefuctis

ii.

iii.

iv.

a.

b.

i.


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RECOMMENDATIONS IN THE DEEPAK PAREKH COMMITTEE REPORTBox 1

I this ctext, it is useful t briefly recut here the grud-realities iifrastructuresectrs.

1.3 The Rakesh Mha Cmmittee Reprt prjected that i 1995 Idia eeded aivestmetfarudUS$330t345billiiifrastructurever10years,i.e.,1997t2006.ItasprjectedthattheaualivestmetlevelastberaisedfrmUS$17billi(5.5percetfGDP)tUS$50billi(8percetfGDP)ithisdurati,

ithprivatesectrsharerisigfrmUS$3.45billi(20percet)tUS$23billi(46percet).

1.4 ItisterthythattheEcmicSurveyfIdia(February2008)hasestimatedtheivestmeteedsiphysicalifrastructureatUS$500billi(at2006-07prices@US$1=InR40),hereithesharesprjectedere:

CetralGvermet 37.16% US$185.8billi

StateGvermets 32.76% US$163.8billi

PrivateSectr 30.07% US$150.4billi

US$500.0billi

outfthettalprjectedivestmet,debtisexpectedtcmpriseabut49.78percet.

iv.

othe basisfthe bservatis made the cstraits, the reprt makes, amgtherthigs, the fllig recmmedatis ad suggestis fr fiacig rapid develpmet fifrastructure:

Imprvigitermediatifdmesticfiacialsavigssthattheyarechaelledtmeetthespecificrequiremetsfifrastructureivestmetsuchasthserelatigtrisk,teradscale;Facilitatigtargetedaccesstfreigfiacialsavigs;Distributigfiacialriskmreidelyadefficietlyacrssthedmesticfiacialsystemadabrad,tavidexcessiveccetrati;Makigifrastructurefiacig-especiallyisectrshereithastbeetraditiallyfrthcmig-relativelymreattractivefraidespectrumfivestrs/fiacierclassesbyprvidigmreliberalregulatryregimesfrifrastructurevis--vis-ifrastructuresectrsadismecases,fferigelldefiedfiscalicetives;adAchievigalltheabvethrugha facilitatig(ratherthadirective)framerkfreachclassffiacigistituti,hileesurigthatacceleratedivestmetiifrastructure

destjepardisefiscaldisciplie,fiacialstabilityadexteralviability.

T advace these bjectives, the Cmmittee prpses several iitiatives hich are bradlyclassifiedasuder:

Develpmetfdmesticdebtcapitalmarket;

Tappigtheptetialfisuracesectr;

RatialisigbaksadnBFCsparticipatiiifrastructurefiacig;

Fiscalmeasures;

Facilitatigequityflsitifrastructure;

Iducigfreigivestmetsitifrastructure;ad

Utilisigfreigexchagereserves.

i.

ii.

iii.

iv.

v.

vi.

vii.


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1.5 Ivief theistitutialadfiacigcstraitsidetified iDeepak ParekhCmmitteeReprt(May2007),theeedfrPPPfrifrastructuredevelpmetasellrecgisedbyGvermetfIdia.ThekeybservatisadrecmmedatisftheDeepakParekhCmmitteeReprt(Bx1)areterthy:

1.6 T secure time bud creatig f rld class ifrastructure, sme recetGvermetiitiativesareterthy,beig:

cstitutifaCmmitteeIfrastructure(CoI),headedbythePrimeMiisteriAugust2004-tiitiatepliciesthatesuretime-budcreatififrastructureaddeliveryfservicesmatchigiteratialstadardshileesurigthatthestructuresmaximizetherlefpublic-privateparterships(PPPs).ThePlaigCmmissirkedastheSecretariatttheCoI;

cstitutifaPPPCellitheDepartmetfEcmicAffairs(DEA)-tprvidegreaterfcustmaistreamigPPPsbthitheCetraladStatesectrs.TheDEAhastakeseveralmajriitiativesithemattersccerigPPPs icludig plicy, schemes, prgrammes ad capacity buildig. whileecuragigPPPs,sixcstraitshavebeeidetified:

Plicyadregulatrygaps,speciallyrelatigtspecificsectrpliciesadregulatis;

Iadequate availability f lg-term fiace (10-year-plus ter)-bthequityaddebt;

IadequatecapacityipublicistitutisadpublicfficialstmaagePPPprcesses;

Iadequatecapacityitheprivatesectr-bthithefrmfdevelper/ivestradtechicalmaper;

Iadequateshelffbakableifrastructureprjectsthatcabebidut

ttheprivatesectr;adIadequateadvcacytcreategreateracceptacefPPPsbythepublic.

c. Varius State Gvermets have cstituted PPP Cells t be the fcalpitsfrudertakigiitiativestardseffectivelyattractigapipeliefPPP prjects ad implemetig them ithi the state as als udertakigcapacitybuildigfrthesame.ThesePPPCellsismeStateshavebeeverypractiveadarerkigithGItsuccessfullydesigadimplemetPPPprjects.

d. Steps have bee iitiated t create a eablig framerk fr PPPs byaddressigissuesrelatigtplicyadregulatryevirmet.Prgressively,

additialsectrshavebeepeedtprivateadfreigivestmet,levyfuserchargesisbeigprmted,regulatryistitutisarebeigsetupadstregtheed,adfiscalicetivesaregivetifrastructureprjects.

e. Stadardisedctractualdcumetssuchassectr-specificMdelCcessiAgreemets, hich ill lay d the stadard terms relatig t allcatif risk, ctiget liabilities ad guaratees as ell as service quality adperfrmace stadards, ad stadardised biddig dcumets such as MdelRequestfrQualificatisadMdelRequestfrPrpsalsarebeigpreparedadtified.

f. Apprval mechaism fr PPPs i the Cetral sectr has bee streamlied

thrugh settig up f the Public-Private Partership Appraisal Cmmittee(PPPAC).

a.

b.

i.

ii.

iii.

iv.

v.

vi.


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g. Taddressthefiacigeedsftheseprjects,variusstepshavebeetakesuchasthesettigupftheIdiaIfrastructureFiaceCmpayLimited(IIFCL)tprvidelgterdebttifrastructureprjects.

h. LauchfaSchemefrFiacialsupprttPPPsiIfrastructuretprvideViabilityGapFudig(VGF)tPPPprjects.

i. MultilateralageciessuchastheAsiaDevelpmetBakhavebeepermitted

traiserupeebdsadcarryutcurrecysapstprvidelg-termdebtt PPP prjects. Settig up f dedicated ifrastructure fuds is als beigecuragedticreasetheflfequityivestmets.

j. TheIdiaIfrastructureFiaceIitiative,facilitatedbyMiistryfFiace,isesuchcllabrativeeffrttdeplyapprximatelyUS$5billiicapitalfrifrastructureprjectsiIdia.Thefudisstructuredasaveturecapitalfud,ithabutUS$2billiiequitycapitaladUS$3billiilg-termdebtfiacigithmaturitiesexceedig10years.

k. TheGvermetfIdiaallsFDIimstifrastructuresectrsttheextetf100percet.Thetimeisripefrthefreigstrategicivestrs

tbegittakiggreateriterestiprjectdevelpmetadmaagemetactivityiIdia.

l. The Guidelies fr Idia Ifrastructure Prject Develpmet Fud (IIPDF)Scheme have bee tified. The IIPDF ith a iitial budgetary utlay fRs100crreuldbearevlvigfudthatuldgetrepleishedthrughsuccessfeeearedfrmsuccessfulbidprjects,ad,ifeedbe,uldbesupplemetedisubsequetyearsthrughbudgetsupprt.TheIIPDFuldassistrdiarilyupt75percetftheprjectdevelpmetexpesesasiterestfreela.

m. I2006,cmmitmetst Idia ifrastructureprjects ithprivatepartici-

patierearuddublethatfBraziladChia,makigIdiatheleaderamgstthemiddleadl-icmecutries.

1.7 ThestatusfPPPprjectsiifrastructuredevelpmet,assetutitheEcmicSurveyfIdia(February2008)isistructive,adsetutiTables1ad2.

2. Public Private Partnership Options and

Procurement/Design

2.1 PublicPrivatePartershipmaybedescribedasamdefdeliveryfpublicgdsadservicesthrughprivateeterpriseadefficiecyduetassciatifprivate

Sector

Total

Number of

Projects

Total Number of Projects based on

value of contracts

Value of

Contracts

(Rs Crore)

Lesstha100Cr.

Betee100ad250Cr.

Betee251ad500Cr.

Mretha500Cr.

Airprt 5 - - 1 4 19,111

Prts 38 3 5 6 24 60,487

Railays 3 - 1 2 - 1,007

Rads 170 74 20 51 25 47,091

UrbaDevelpmet

5 3 - 1 1 1,879

PPP PROJECTS IN INDIAN INFRASTRUCTURE: VALUE OF CONTRACTSTable 1


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sectr ithe prject.whileprivate sectr participati isecessary, byitself itistsufficiettprvideasustaiableslutitifrastructureprblems.Frsuccess,certaithercriticalfactrsmustexisticludig:

optima2legal-plicy-regulatryframerk3;

Ifrmed gvermet acti i structurig, biddig, selecti, egtiatiad implemetati f prjects thrugh PPP take by peple ith

capacity;

Stakehlderivlvemeticriticalstagesfdecisi-makigtsecureeffectivedesigadimplemetati;

optimalallcatifrles,respsibilitiesadrisksiprjectctractsithsuitableVFM(valuefrmey)utcmes;

Viable fuctiig ithut udue r ureasable itervetis, icludigrecveryflegitimateadreasableexpeditureithareasableretur ivestmet cmmesurate ith risk take ad cmpetig ivestmetpprtuities;

Targetigfelfaremeasurestesurethattheitededsegmetsgetthebeefit;ad

Esurigbalacebeteeviabilityadelfaremeasures,hichsecurepublicplicybjectiveslikeadherecetevirmetalprtecti,health,safetyadqualitystadards.

2.2 Typically,publicservicecstitutedgvermetmpliessiceidepedecesubject t specific exemptis like muicipal services i Jamshedpur by TataGrupsutilityrpersupplyiCalcuttarMumbai.Csequetly,prvisifpublicservicebyayetitytbeigaistrumetalityfstaterpublicauthrityrequiredspecificauthrisatiudertheapplicablelas.Besidestheplicychages,

variusstatuteshadtbeamededreactedtestablishalevelplayigfieldadfacilitateprivateparticipatilikethenatialHighaysAuthrityfIdiaAct,1988,theElectricityLas(Amedmet)Actsf1991ad1998,culmiatigiare-eactmetf100yearldlasitacmprehesiveElectricityAct,2003et.al.Thatevlutiisdepictedatparagraph1.1.

2 Thistermtrulyreflectsstrikigabalacebeteethecflictigiteresttiduceivestmetsadecmicgrth,

ithutcmprmisigtheiterestfthehesttax-payeradcitize(icludigelfarebjectivesfsecurigbasichumaeedsadlifeithdigityidepedetfaffrdabilitybyaidividual).3 Discussedisecti4fthispaper.

a.

b.

c.

d.

e.

f.

g.

SectorTotal Number

of Projects

Total Number of Projects based on contract

award Method

Value of

(Rs Crore)

DmesticCmpetitiveBiddig

IteratialCmpetitiveBiddig

negtiatedMoU

Airprt 4 - 4 - 18,808

Prts 28 4 12 12 57,433

Railays 3 1 - 2 1,007

Rads 164 123 36 5 45,737

UrbaDevelpmet

2 1 1 - 525

Source: 1. Infrastructure Public-Private Partnership Financing in India, a study undertaken by PWC at the instance of DEA in collaboration with

World Bank; 2. Online database on PPPs. [As set out in the Economic Survey of India, February 2008]

PPP PROJECTS IN INDIAN INFRASTRUCTURE: CONTRACTS AWARDED Table 2


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2.3 The ature ad extet fprivate sectr participati iifrastructureprjectscaccurivariedlevelsadfrmats-ragigfrmpubliclyedadperatedifrastructure here private party maybe a mere ctractr fr prcuremetfspecificgdsrservices(likedesig,equipmet,maiteace)tershipparticipatiiprjectspecialpurpsevehicles.Therearelimitatisthefrmatfprjectstructurigthughsmehavebeemreivguethathersadcertaistructuresmayqualifyfrspecificschemesffiscalicetives.SmefthemreprevaletfrmatsaredescribedbrieflyiAppedixI.

2.4 ThechiceffrmatfrPPPisafuctifadecisibythecceredgvermetalauthritytherleadrisk-allcatiamgstthevariusstakehldersbasedtheevaluatiffactrslike:

felteedfraparticularifrastructurefacility;

felteedfrprivateparticipatiithedevelpmetadperatifthatfacility;

mstefficietayfdevelpigadperatigthatfacilityad

balacebeteeviability,elfarebjectivesadpublicplicyeedsfthatifrastructurefacility.

At times the ivestmet climate ad ccers may als ifluece prjectstructurig.

2.5 Structurig the public-private parterships i ifrastructure culd be examiedamgst3geericptis(ithihichthediversefrmatsfiti):

a. Public Ownership and Public Operation.wheretheplicydecisiistretaipublicershipadctrlverthesectr,directprivatefiacigad/r perati uder cmmercial priciples may be achieved thrughvestigverallershipadmaagemetftheprjectiaseparatelegaletityctrlledbytheGvermet,i.e.specialpurpsevehicle(SPV)hichismaagedasaidepedetcmmercialeterprise.Isuchfrmats,privatesectrrlemaycmprise:

BdsrsecuritiesmaybeissuedbytheSPVtleverageprivatefiace(likemuicipalbds)-(PrivateFiace);

Specificperatiadmaiteace(o&M)activity/iesmaybectractedutttheprivatesectr(ServiceCtract)ad

Apackage/ragefo&Mactivitiesmaybectractedtaprivateetity,actigasaagetfthectractigauthrity(MaagemetCtract).The

peratrscmpesatimaybelikedtitsperfrmacespecifiedparametershereverificatiispracticablesuchthatthefixedfeesmaybepredicatedamiimumassuredutput/levelfperfrmace,ithcertaiicetivesfrbetterlevelsfperfrmace(virtuallysharigthesavigs/up-side).

b. Public Ownership but Private Operations.Thecmpleteo&Mfthepublicifrastructurefacilitymaybectractedtaprivateetity,like:

Publicwrks/ServiceCcessis:wherebyaprivateetityispermittedfradefiedperidtuseaifrastructurefacilitytsupplytheservicestcsumersadcllectreveuefrthesame.Attimesheae

facility/assetistbecreated,thatrkmaybeassigedtthesameratherprivatepartyfrthectractigauthrity;ad

a.

b.

c.

d.

i.

ii.

iii.

i.


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LeaserAffermage:Athervariatheretheselectedprivateetityisvestediththeo&Mfaifrastructurefacilitybuiltbyrbehalffthe Gvermet,r fiacedby public fuds. The private etity isetitledt charge fr servicesprvided ad bliged tpay a prtifreveuetthectractigauthrity,hichmaybeutilisedbytheauthritytreplythecstituticst.

c. Private Ownership and Operation.Heretheprivatepartystheassetsadperatesthefacility.Theremaybeseveralvariatslike:

Divestiture(jitveturer100percet);

Istacesherectractigauthrityretaistherighttreclaimtitle

tthefacilityrtakebackitsperatithrughmechaismlikeglde

share;ad

Licesed activity-here private ership f the physical assets

(electricity r telecmmuicatis etrk) is separable frm the

licesepermittigprvisifpublicservices(gratedbyaecmic

regulatr asi electricity, rthe gvermetas itelecm licesees

bytheDepartmet fTelecmmuicatisfGvermetf Idia).

Isuchcases,the licese isrmallyfra defiedtimeframe,thugh

reeable.Suchliceseisalsliabletsuspesiad/rtermiati

bythecceredauthrityidefiedcircumstaces.Assuch,ctiued

ership f the assets may tresult autmatically it a right t

prvidetheservice-hichmayhaveabearigstructurigfexit

ptisadvaluatimechaismtherefr.

2.6 Fudametal t a successful desig, prcuremet ad implemetati f a

ifrastructureprjecti aPPPfrmatis theabilityf bthparters-publicad

private-t:actiafair,trasparetmaeradrkithalgtermviefsharedbjectives;ad

uderstadtheeedtbalacetheVFMadelfarebjectivesfpublicservice ith viability, bakability ad earig a reasable retur ivestmetsfprivateeterprisecmmesuratetriskivlved.

2.7 AcmparativeassessmetfsmeftheregularlyseefrmatsfPPPvarius

attributesaresetutiAppedixIIheret.

2.8 Fr effectively udertakig ifrastructure develpmet ad/r maagemet

iPPPfrmat,thestructurigftheetireprjectdevelpmet,prcuremetad implemetati/mitrig phases (icludig the uderlyig ctractual

arragemets)mustfcus:

prject idetificati, preparati ad selecti f PPP pti/frmat ithclarityfthevaluefrmeybjectives(service,stadardsfperfrmace,savigsfpublicfuds,etc.);

slicitigprivatesectrparticipatiadselectiftheparticipat,resultig

iaardfprjectadctractegtiatiithisbehalf;

cstructiPhaseculmiatigicapacitydemstrati/cmpletitests;

cmmercialoperatiadImplemetatiasperagreedstadardstdeliver

gdquality,affrdableadreliableifrastructureservicead

ii.

i.

ii.

iii.

a.

b.

a.

b.

c.

d.


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hadveradtrasferftheifrastructurefacilitytthegvermetalauthritycceredaftercmpletifthetermritheevetftakeveritermsftheprjectagreemet(hetheritisduetfrcemajeure,termiatirexit).

2.9 Ayprjectivlvigcreati/upgradatififrastructurefacilitiesadperati

therefivlvesaumberfstakehldersegagedidiverseaspectsasdepicted

fr per prjects ad telecmmuicati prjects depicted i Appedix III.Differetstakehldershaveinter-serelatishipsfrdiversestagesadaspectsf

theprject,like:

Desigig;

Egieerig;

Cstructi;

Maiteaceadrepairs;

operatis;

Fiacig;

Fuel,ramaterialadiputprcuremetadstragead

Sale/Delivery.

Severalftheseuderlyigrelatishipsadrulesaretselfevidetfrmtheed-csumerperspective,admustbe uderstdtstructure,prcureadsecureefficiet,affrdableadviableifrastructurefacilities.Smekeystakehldersadtheirdiverserles,respsibilitiesaditerestsaredescribedbel.

2.10 Evidetly,theabverelatishipsadfuctishavetrktgetheriachesivead itegratedmaer tesurethatthe ifrastructurefacilityi questi gets

created, perated ad maitaiedtdeliver gd quality, reliable, safe, efficietad affrdable ifrastructure service. This is pulled tgether based a set fiterdepedetctractualarragemets.

2.11 Gvermet:

As the custdia f iterests f the citizes/csumers, Gvermet iscceredithsecurig:

Qualityifrastructurefacilitiesataffrdableprices;

Publicplicybjectivesficlusivegrthfrremteareasadlifeliesuppliesad

The evirmetal impact f implemetig the ifrastructure prjectisdulyassessedadmaagedtavid/prevetayudeservedadverseimpact.

b. Ascustdiafiterestftax-payers,Gvermetseekstesurethat:

The burde public fiaces are reduced/elimiated ith respectt viable ifrastructure facilities s that they ca be redirected tdevelpmetaladelfareschemes;

The fiscal icetives ffered t facilitate such PPP is reasable adesuresbeeficialresultsfrthecitizesad

Theccessis,permissisadfacilitiesgrateddtgetabused,explitedrdivertedfrmthePrjecttresultiudeservedidfallprfitsfrtheprivateplayersad/rleders.

e.

a.

b.

c.

d.

e.

f.

g.

h.

a.

i.

ii.

iii.

i.

ii.

iii.


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2.12 Develpers,as the ivestrsi highcst,lggestatiadprlgedpaybackpublicassets/services,areiterestediesurigthat:

The prject viability is rig-feced frm ppulist iterveti f theGvermets;

The prject ctracts ad the applicable legal framerk esures that it islegitimateadvestsefrceablerightsihishads;

Hegetsmaximumflexibilityiperatiadmaagemetftheifrastructureassetsadservices-frmthestagefprcuremettdeliveryad

Heisvestedithabakableprjectithallattributesassetutiparagraph3.8bel.Thatuldaddresstheledersccersasell.

2.13 Lad oers: Ivariably, large ifrastructureprjectsrequireacquisiti f largetractsfctiguusladhichissuitablefruseftheprject(icludigtheladusepermissis,clearacesfrmstatutryauthritieslikeStatePllutiCtrlBard,MiistryfEvirmetadFrest,et.al.).Theladershseladmayeedtbeacquiredfrsuchprjectsareiterestedisecurigthefllig:

olysuchladisacquiredasisrequiredfrtheifrastructurefacilityithutayarbitrageridfallprfitstthedevelperad

A fair ad reasable rehabilitati ad resettlemet package (icludigcmpesati)isimplemetedexpeditiusly.

2.14 Suppliers(Fuel,EPC,o&M,Techlgy,etc.)fvariusfacilitiesadservicestthePrjectareiterestedisecurigthefllig:

Fairadtrasparetselectiprcessad

Timely paymet f dues ad safeguards agaist ufair rejectis, csts adithhldigfpaymets.

2.15 Emplyeesfpubliccrpratisaresigificatstakehldersithesectr,hseccers eed t be examied ad addressed t secure their buy-i fr therestructurigadimplemetigPPPprjectssice:

wrkme4areadifferetclassfrmemplyeesthertharkme;

Emplymetuderstate5isdistictfrmprivateemplymet;ad

Emplyeesfeelthreateedbychagesre.theirretetiadredeplymettsecuretheirlivelihdithechagedevirmet.

2.16 Csumersftheifrastructureareprimarilyiterestedi:

deliveryfgdquality,affrdableadreliableservices;

aefficiet,csumerfcusedadrespsiveperatr;

4 Therkmecategrycsistsfallblue-cllaredemplyeesegagediaymaual,uskilled,techical,peratialrclericalrk-beigetitledtvariusbeefits/prtectisudervariusIdialaburlasicludigtheIdustrialDisputesAct,1947.Thedecisivefactridetermiighetheraemplyeeisarkmartishisactualaturefduties(desigatirremueratiistthematerialfactr).

Emplyeesthertharkmecmprisefemplyeeshsefuctisarepredmiatlymaagerial,admiistrativeadsupervisrydtejyayprtectisbylas,adtheiremplymet-relatedissuesillbe gveredbytheemplymetctractadtheIdiaCtractAct,1872.

5 Atherrelevatcsideratiisthatemplyeesfaestablishmetedbythe State,areals etitledtcertailegal safeguards as regards theiremplymet, icludig prtectis i terms f security f service, equal pay frequalrk,discrimiatifaykid,reservatisfrvariusbackardsectisfsciety.Article16(1)ftheCstituti,prvidesthatthereshallbeequalityfpprtuityfrallcitizesimattersrelatitemplymetr

appitmettayfficeudertheState.ThemattersreferredtabveiArticle16(1)cver(i)Iitialappitmet;(ii)Prmtis;(iii)Termiatifemplymet;(iv)Mattersrelatigtsalary,peridicalicremets,leave,gratuity,pesi,agefsuperauati,etc.Therefreaemplyeeftheutilitymayctiuetbeetitledtthesameeveafterayfuctialubudlig.

a.

b.

c.

d.

a.

b.

a.

b.

a.

b.

c.

a.

b.


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2.17 Ay cmmercial arragemet at the ed f the day is a mix/budle f juralrelatishipsiter-separtiescmprisedf:

Duties-h peple ught r ught t t behave ith regard t thers(CrrelatefRightfthers);

Liberties-freedmtactrttact(butduty);

Per-talterlegalsituatisad

Immuities-frm havig existig legal situatis altered (i.e., Disability fthers).

2.18 AtthefudatifctractstructurigisaHhfieldsaalysisfjuralrelatisasdepictedbyPrfessrwilliamsbestrepresetsthesameasflls:

Ithislikage,thereisajuralc-relatiship/c-existecef:

RightadDuty;

Privilegeadnright;

PeradLiabilityad

ImmuityadDisability.b. othetherhad,theflligareppsites(catcexist):

Rightadnright;

PrivilegeadDuty;

PeradDisabilityad

ImmuityadLiability.

3. Role and Responsibilities of Stakeholders:

Balancing Welfare with Viability3.1 Theiter-play f elfarebjectives i peratisf aecmic activityhas

ivariablyledtthefiscaldifficultiesadissuesfsustaiabilityfvariusifrastructuresectrsiIdia(aditeratially).Thisivariablyresultsitariffdistrtisithsigificat subsidyburdes ad budgetary cstraits Gvermets-hich isicreasiglybeigbligedtfudevetherkigcapitaladpay-rlleedsfsectrs.Asadirectcsequece,ifrastructurefacilitiesicremetallydeterirateiththepassageftime(duetprmaiteace,repairs,replacemetet al.).Theseaspectsfstateedmpliesadthefeeligfcsumersashstageledtrestructurigadrefrms.

3.2 ThepublicelemetfifrastructureservicesmakesitsubjectttheTragediesftheCmms6.Achievigthegreatestgdfrthegreatestumbersrequirestheptimisatifrelatedvariables(ppulatiadresurces)adgetsexacerbatedduetthefllig:

Thefailureftheidividualstgiveprecedecetadcsidertheiterestsfthelargerscialgrupithihichtheylive;

Theppulatifthisrldisgrigexpetiallyhereastheresurcesdtgratall;

Ifidividualsdtvalueafreepublicgdresurceaduseitecmicallyasperhiseeds-itsmisuseadastagesisatthecstftheetirecmmuity,

6 GarretHardi,1968.

a.

b.

c.

d.

a.

i.

ii.

iii.

iv.

i.

ii.

iii.

iv.

a.

b.

c.


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Freeruviable(atdistrtedadtviablecstreflective)supplyfservicesadgdserdeschacesfptimalutilisatifscarceresurceserdigallcativeefficiecies.

3.3 oefthecrucialfacetsfrefrmadPPPitheifrastructuresectrrelatestgveracefthesectrecmpassig:

rlefthegvermetaletity,stateedeterprises;

distacig f the Gvermet (ivariably beig the er f the dmiaticumbet)frm

selectiftheccessiaire/PPPprpet;

day-t-daymaagemetad

regulatifthesectr.

Structureadimplemetatiftheregulatrymechaismisfudametaltthisissueadmustbedetermiedup-frt.ItisterthythatthechicefthePPPptis,theidustrystructureaddesigftheregulatrymechaismare clsely iter-liked. A effective, fair ad trasparet structure uldalleviateriskperceptiadmitigatecstfPPPtrasacti,bysecurigalevelplayigfieldadeffectiveregulati.

3.4 Itheglbalisigrld,everyivestr(debtr equity)eighsdiverseptistdetermieheretivesthismey.Cetraltthisivestmetdecisiisriskprfileftheivestmetpprtuityiquestievaluatedictrastithcmpetigivestmetpprtuities.Riskithectextfivestmetreflectsitheucertaityfreturadallivestmetdecisishigethecmpetigpprtuitiesavailableasalsajudgmetasthetheritisrthhiletivesthere.

3.5 Theabverisksbecmeaccetuatedithectextftheuiquerisksassciated

ithivestmetsiadfiacigfifrastructureprjectsduetcertaipeculiarfeatureshicheedtbeideallyaddressedupfrt(befreivestmet)thrughthegverigframerk,viz.:

Ifrastructure services (per, ater, trasprt, ad telecmmuicatis)areidelycsumedadusuallycsideredessetialfrmderlife.Thisicreasespliticalsesitivitytthequalityadreliabilityftheserviceaditspricig,expsigtheirperatistrisksfitervetiistplicies,ppulismaditrisicsupervisi.

Ifrastructure prjects ivlve typically large ivestmets that require lggestatiperidstbrigtheprjectstreveuestreamadthereaftervery

lg payback perids. Thesheertimescaleitrducesriskf ucertaityfshiftig plicies/pririties chages i circumstaces ad risk f becmig astradedasset/sukcst.

Certaielemetsfthevaluechaiieachifrastructureactivityareitrisicallymplisticiature-duetecmic,pliticalad/rhistricalreass.Ivariably,ithisrespect,Gvermetsad/rregulatrsplayaprmietrleiregulatif:

etryadexit;

prices;

qualityfservicead

theraspectsfperfrmace.

d.

a.

b.

i.

ii.

iii.

a.

b.

c.

i.

ii.

iii.

iv.


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d. oftegvermet-edcmpaiesmaybekeysupplierstad/rpurchasersfrm private ifrastructure prjects, makig them pre t uecmicitervetis ad scrutiy. Imprtat parameters fr the cduct f theirperatisdepeduptheutcmefgvermetadregulatrydecisi-makigadimplemetatiprcesses.

e. Ifrastructureprjects are characterised bysigificat debt fiacig fthe

traditialbalacesheetsupprt.TheseprjectsareftefiacedthrughSpecialPurpseVehicles(SPVs)adarestructuredalimited/-recursebasistardstheparetcmpay,ithfcusfrecurseprjectreveuestreamadassets.Crucialtsuchprjectsisprperidetificatiadallcatifvariusprjectsamgsttheetitiesparticipatig.

f. oce made, such ivestmets get lcked i fr prlged perids(suk-csts)hichcapsesigificatchallegesfrbakabilityduetcstraied fugibility-difficulty i exit, exprpriati risk, ad market/reveuerisk.Here,asivestrsarecmmittedtprjects,theycapullutlybytakigahugelss.Ifgvermetssubsequetlylerpricesrdtraisethemasrigiallyagreed,ivestrsrutheriskf beigvictimsfthebslescetbargairexprpriati.

g. Ivestrs ad leders are typically uillig t make ivestmets ithutadequateadftecmplexctractualprtectis.Evethughegtiatifsuchctractsistediusadcstly,thebestfthectractsmaytprtectivestrsadledersagaisttheeffrtsfadetermiedgvermet.

Efrceabilityfthesectractsisessetial,buttugh.Ivestrsevaluaterisksfthepssibilityf:

chagigctractualagreemetsaditsimplemetatis;r

failure by the gvermet t implemet such agreemets due t

extraeuscsideratis.h. Arbitratiad settlemetfdisputestedtbevery timecsumigad

addtprjectcst.Beighighlycapital-itesiveprjects,theperceivedrisksadcstsfdelayireslutifdisputesculdbeextremelyhighhichmayredertheivestmettdesirable.

3.6 Thefuctiigadgveraceftheutilityasalsprcurigefficiet,affrdableservicesareattheveryheartfthePPP.Accutabilityadefficiecyarecrucialtrehabilitatigthesectr,prtectigtheiterestsfsharehldersadivestrs,adhecetattractprivateivestmet.Thefudatifrthisshuldbeprvidedfrithelegal-regulatry-plicyframerk.Ivieftheaturefgdsad

servicesivlved,theumberfstakehldersismuchlargerfrapublicutilityaditicludespersshmaythaveadirectcmmercialiterestitheperatisftheutility,e.g.,allcatifaterbeteedifferetusers,evirmetaladeclgicalimpactfpractices.Thelegaladregulatryframerkshuldctaisafeguards t prtect the iterests f specific stakehlder grups, ad prvidefrcsultatiadpecmmuicatiiththematthetimefselectigadimplemetigPPPptisiatrasparetadcmpetitivemaer.

3.7 Distacigdmiaticumbets(ivariably state ed)adthe gvermetfrmtheday-t-dayperatisadregulati(ecmicadperfrmace)fthesectrcabeachievedthrugheitheraautmusadcapableregulatry

authrity,rbyestablishigarbustctractualframerk(hereregulatiisbyctracts).

i.

ii.


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3.8 The cardial rule f ecmic regulati is that the cst f prvidig efficietserviceshastbepaidfr.Thepaymetcacmefrmacmbiatif:

Therate-payer/csumerftheservice(thrughcst-reflectivetariffsithitra-sectraladjustmetsadcrsssubsidy);

The tax-payer (thrughtaxes,cessr therlevyfrthe sectr, asellasgvermetgrats,subsidiesadsubvetistthesectr)-hichmustbe

targetedaddeliveredefficietly;

Aefficaciusratialisatifthetariffssthathilethesystemisisulatedfrmtariffshcksitheearlystages,ithefficiecygaisadefficaciusregulati,thecrss-subsidiesarephasedutiaelldefiedtrasiti.Privateetrepreeurcattakethesubsidyriskadthecashflmustbeprvidedfr.

3.9 Afairbalacehastbestruckbeteecmpetigissuessuchasprices,custmerservice,evirmetprtecti,abilitytpayadeedtuse.Suitableprvisisfrextra-rdiarypriceadjustmetsmustbeprvidedfrspecificpre-determiedgrudslikechageiservicebligatis,chagefla,breachfctract,icreasefccessifee,thereceiptfagrat,evetffrcemajeure.

3.10 AimprtatbjectivefctractdesigfrPPP,asalsregulatifimplemetatiistseekthebaseliefperfrmaceparametersfthesectr/utilityadestablishtheutputparameterstbeattaiedvertimehere:

The attaiig fthese targets mustbelikedtthetariff thatthe utility isetitledtchargefritsservices;

Icetivesaddisicetivesarebuiltitiduceperatrstsurpassthestipulatedparametersadimprveservices;

Frefficaciusperfrmaceparametersilgteurectracts,thegeeralpricipleslikeefficietprvisiservicewSS,cst-reflectivetariffs,cverage

mustbebuiltiasell;

a.

b.

c.

a.

b.

c.

RegulatorEntities

Policies Sector

Strategy & marker

definition Subsidy

USO & coverage

Creating/maintaining infrastructure

Providing access & service

Business Planning Operations

Economic regulation/Tariff Market &

competition Rules for entry & exit:

Licensing Performance (QoS)

regulation Dispute resolution

Government

Important to

define role of

players with a

workable

relationship

GOVERNANCE-REGULATION COMPACT Figure 2


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Thediscretitsettheparametersparticularlyfrdifferetialqualityadtariffs must be either left t the ctract r regulatr. Jit plaig fperfrmace parameters i partership ith the cmmuity f users (adptetialusers)isrecmmeded.

3.11 Ifafudametalstructuralchageisbeigbrughtabutirespectfasectrraifrastructurefacility,thegverigframerkmustprvideasuitabletrasiti

pathverafiiteperid,durighichthesectrshallbemitredadregulated.Byprvidigefficiecytargetslikediththetariffpath,theutilitiesadthetherstakehldersillbefcusedicremetalimprvemetftheperfrmacethatayshrtfallattractspealtiesadthecsumersgetimprvedsupplyithpassageftime.ThiseffrtuldrequiresigificativestmetsfcusedimprvigtheifrastructureadtheMISftheutilities,asalsgettigtheutilitiesfcused peratialefficiecies ad cmmercial prcesses icludig meterig, billig,cllectis,discectis,cmmercialarragemets,etc.

3.12 Ivariably,ayPPPhast befudedasuitablesharigf risksamgst thepublic(Gvermet)adprivateparters.Itisrmaltfidthatthegratrf

theccessiisbligedtperfrmcertaifuctis,rlesadtasks,hichareuderitsctrlad/rbestmaagedbyState-adbear/sharetheriskffailure.Thismaybeecessitatedduetacmbiatiffactrsicludig:

Legaladplicyframerk,liketificatiflevy/fees;

Trasiti maagemet/fiacig fr a sectr facig sigificat tariffdistrtis;

Maagig/crdiatigcsetsfmultiplegvermetalageciestsecuretimelyimplemetati.

4. The Governing Framework (Legal-Regulatory-Policy Framework)

[Mr. Philandex Knox, the then Attorney General to the Govt. of United States of President

Roosevelt, in context of acquisition of the Panama Canal is stated to have advised: Oh, Mr.

President, do not let so great an achievement suffer from any faint of legality]

4.1 I a cmm la jurisdicti like Idia, the applicable legal-regulatry-plicyframerk(gverigframerk)playsavitalrleidefiigtherulesfthegamefrvariusstakehldersiayecmicactivity.

4.2. Thegverigframerkcmprisesthefllig:

TheCstitutifIdiacharacterisedby:Itstigalsfscialadecmicjustice;

Fudametal rights f citize hich act as a check State acti,icludig the freedm t d laful busiess, trade ad cmmerce(subjecttreasablerestrictisimpsedbylaspecificgrudspermissible);

RighttPrperty;

SeparatifPersamgst3igsfState-executive,legislativeadjudiciaryithaibuiltsystemfchecksadbalacig;

DirectivePriciplesfStatePlicybeigthebjectivesthatmustalaysguideStateacti;

d.

a.

b.

c.

a.i.

ii.

iii.

iv.

v.


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Cetre-Staterelatisregardigallcatiflegislativeadexecutivepers;

AccesstJustice.

b. Diverse legislati applicable t a particular sectr/activity (eacted by alegislaturefcmpetece),viz:

LasgverigvariussectrliketheElectricityAct,2003;theTelecm

RegulatryAuthrityfIdiaAct,1997;thenatialHighaysAuthrityfIdiaAct,1988;MuicipallasfvariusStates;

LasgverigrmalcmmercialtrasactisliketheCtractAct,1872;theSalefGdsAct,1930;thenegtiableIstrumetsAct,1881; the Cmpaies Act,1956; the Freig Exchage MaagemetAct,1999;theCmpetitiAct,2002;

Las fr recgiti ad efrcemet f rights ad bligatis liketheSpecificReliefAct,1963,theCdefCivilPrcedure,1908,theArbitratiadCciliatiAct,1996.

c. Abdyfdelegatedadsub-rdiatelegislati(rules,regulatis,bye-las,tificatis,schemesetc.)emaatigfrmsucheactedstatutes.

d. A bdy f Cetral ad State level executive istrumets (plicy, rders,clarificatis,lcatialicetiveschemesetc.),hichmayhavebeeissuedi exercise f the cstitutially grated Executive Pers (hich are aresiduefallpersfStateaditsEmietDmai),rexecutiveperrecgised/vested/defiedbylegislati;

e. Bidig ruligs ad istrumets issued by a regulatry authrity/agecycreated by statute t regulate specific sectrs, activities ad busiessesithi the framerk f the applicable la ad plicy. This may iclude

regulatis, practice directis, liceses, quality f supply stadards, tariffrders,perfrmacestadards,safetystadards,evirmetalissues,adcase-specificrders.

4.3 Tsigificatelemetshichhaveastrgbearigprivateparticipatiaredescribedbel.

RegulatifEtryadExitfrPrivateEterprise.Theframerkdefies:

Sectr/Idustry ise clarity abut the level f private participatipermitted i diverse facets ragig frm private ership t variedfrmatsfpublicprivatepartershipsicludigheresectrisreservedfrsmallscalesectrrpublicstateership;

Thefrmatfsuchprivateparticipatiasalsthetermsadcditisapplicabletheret;

Rulesgverigprcuremetfgds,services,techlgyfrmprivatesectr;

Easefexit,hichftedetermiesthezealfretry.

b. Rules f theGame.Besides etryad exit,theframerk als defies theframerk ithi hichthe cmmercial eterprise ca exist,perate adtrasactbusiess,cverigelemetslike:

Areasameabletcmpetitiveprcuremetfgdsadservices;

Areas reserved fr mplies created ad/r prtected ad/rrecgised;

vi.

vii.

i.

ii.

iii.

a.

i.

ii.

iii.

iv.

i.

ii.


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KledgeSeries26

Scpef freedm t egtiatecmmercialarragemets/trasactisithsafeguardsadlimitatis;

obligatis ad limitatis impsed the eterprise i a sectrgverig the supply f gds/services, pricig theref ad relatedperatialmatters;

Recgiti f efrceable rights ad bligatis arisig i relati

t r arisig ut f suchcmmercialarragemets/trasactis, ithapprpriateadefficaciusefrcemetmechaism.

4.4 oafirstblushtheabveseemstbemazefistitutialstructures,arragemets,rights,bligatisaddutiesithihichaecmiceterpriseisexpectedttakerts,trasactbusiessadgeerateealthfritselfadfrtheati.wheelkbeydthefrmalstructures,slgastherulesfetry(FDIregime et. al.)adrulesfthegameareadheredt,thepartiesareleftfreetstructuretheirbusiessrelatishipaddefiesrulesfbusiess.Frmtheperspectiveftheatialecmy,theframerkismeatt:

Prvidesuitableicetivestgiveimpetustsuchcmmercialactivitiesadecmiceterprisehichbestsubservestheatialiterest,availigfthepprtuitiesfferedbyglbalisatiadptimisigitsresurces;

Prvideafacilitativebusiessevirmetfrstakehldersttrasactbusiess,ithsuitablerisk-allcatiadsafeguards;

Safeguardscarceresurcesadstrategicatialiterests;

Establish a platfrm here the elfare bjectives f state ad ecmicbjectivesfprivateetrepreeurscabesuccessfullymarriedtevlveadimplemetviablePPPmdels.

4.5 Ilightfthepublicatureftheservice,depedigthefrmatadpted,rmally

aPPPPrjecttbesuccessfulshalleedalegislativefudatifrpublicetities/utilitiesteteritPPPctractsadarragemets,iparticulartsecure:

Atrasparetadbjectiveprcess(hichismatchedbyimplemetigcapacity)fr selecti f ifrastructure prjects, as als f ccessiaires/privateparticipatsithavaluefrmeyadelfareissuesasbeigrelevatfactrs.Idigs,theprcessdesigmustbecsistetiththegverigframerkfrpublicprcuremethichissummarisediaQ&AFrmatiAppedixV;

Clearly defied apprval, cmpliace ad versight jurisdicti ver a PPPprject,especiallythe rights f lcalad therauthritiesfrm ithi theState,liketheDevelpmetAuthrities,MuicipalAuthrities,Pachayatad

therauthrities;

Cleardefiitiftherle,respsibilityadrightsfvariuspartiesithegverigistrumets(Ccessi/Agreemet,regulatisetc.)icludigthescpefpublicservice,servicestadards,pricig,scpefGvt.itervetiadterms(likepre-paymetfsubsidy)etc;

Participati f private parties i ership ad/r maagemet f publicassetsad/rdeliveryfpublicutilityservices.Thisuldiclude,inter alia,gratfccessi,disivestmetsetal;

Vestigisuchprivateparty,thepert:

Cllect,retaiadapprpriatereveue,inter alia,tmeetreasableexpeses icurred i implemetati f the PPP prject icludig a

iii.

iv.

v.

a.

b.

c.

d.

a.

b.

c.

d.

e.

i.


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pre-determied/agreedreturthefudsemplyed(prfitequity,fiaceaditerestdebtfiace);

Seek revisi/revise the charges ad/r cllecti i terms f theccessi agreemet, hich reveue stream ca facilitate busiessplaigadfiacig;

f. Pertmaitai,upgrade/refurbishadmaagethePPPasset/servicesad

ctrlaccess(asmaybeicrprateditheccessiagreemet)tadusetheref;

g. Scpef bakabilityadsecuritisati f the Ccessi, PrjectAssets adreveue(icludigassigability)tavailaffrdabledebtfiacebysecurigleders.Thisiscriticalsicetypicallydebtfiacefrifrastructureprjectiscstraiedbylimitedterflgtermdebtasalsalackfcapitalmarketistrumets.

4.6 withi this framerk, varius stakehlders (icludig privateparticipats) arefreeteteritvalidadefrceablectractual/cmmercialarragemets7tactuallytrasactbusiess,icludig:

Ivestmet arragemets by private participats ith the cceredistrumetalityfstate/statutryauthrityastheGratrfCcessirJitVetureParterrPricipal;

Arragemetsfrparterigrcllabratiiveturesbetee2rmreperss icludig icrprati f specific etities ith the rules fr theirfuctiig(likeacmpay);

Ctractsfrsale/supplyfgds,servicesritellectualprpertyrights-icludigbusiessprcessutsurcig(BPo),EgieerigPrcuremetadCstructi(EPC),operatisadMaiteace(o&M),RefurbishmetadMderisati(R&M),et.al;

Ctractsfrpermittigusefcertaiassets,facilitiesadrightslikeleases,liceces,ccessis;

Fiacigarragemets.

These ctracts culd vary i cmplexity ad sphisticati frm a sale adpurchasefmilk/espapereverymrigta30yearperpurchaseagreemetrccessitbuild,perateadtrasferaairprt.

CstitutialDistributifLegislativePers[Articles245t254readiththeVIIthScheduleftheCstitutifIdia]

4.7 The Federal/Ui Parliamet isemperedt makelasfrthe hler aypartftheterritryfIdiasubjectsallcatedtitadtheStatelegislaturesmaymakelasfrthehleraypartftheStatecceredsubjectsallcated.TheallcatiflegislativepersbeteetheUiParliametadthestatelegislaturesissetutithethreelegislativelistssetutiScheduleVIIttheCstitutifIdia.Itisterthythat:

TheUiParliamethasexclusivepertlegislateithrespecttsubjectseumerateditheUiList(ListI,ctaiig97etries);

TheUiParliametadtheStateLegislatureshaveccurretpertlegislateitemslistediListIIIi.e.theCcurretList(ListIII,ctaiig47etries);

7 Asdiscussedisecti5fthisPaper.

ii.

a.

b.

c.

d.

e.

a.

b.


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TheState Legislatureshavetheper, tlegislate itemslistedi theStateList(ListII,ctaiig66etries),subjectttheperftheUiParliamettlegislateirespectfmatterseumerateditheUiadtheCcurretList;

TheresidualpertlegislateaspectstspecificallyprvidedfrbelgsttheUiParliamet.

4.8 T give a perspective f their respective rle i ifrastructure develpmetadPPP,asapshtfallcatifperbeteeUiadStatessmeifrastructuresubjectsissetutiAppedixV.

4.9 Icasefayverlapbeteethethreelists,predmiacehasbeegivettheUiParliametsrighttlegislate,itheflligterms:

IfaylamadebytheStatelegislatureisrepugatt:

AyprvisifalamadebytheUiParliametamatterhichtheUiParliametiscmpetetteact,r

Repugattayprvisifaexistiglaithrespecttefthe

mattersitheCcurretListi.e.ListIII,thelamadebytheUiParliamet (hether passed befre r after the State la came itfrce)shallprevail.

b. Assuch,ifthematteriscvereditheCcurretListi.e.ListIII,thelamadebytheStatelegislature,shallbevid,ttheextetthatitisrepugattthelamadebytheUiParliamet;

c. Further,icasethelamadebytheStatelegislatureamatterlisteditheCcurretListhasreceivedtheassetfthePresidetfIdia,thesuchStatelashallprevailithatStateadverrideayParliametarylafrthetimebeigifrce;

d. ntithstadigsuchPresidetialasset,theUiParliametmayeactalairespectfthesamemattericludigalaaddigt,amedig,varyigrrepealigthelasmadebytheStatelegislature.

CstitutialDistributifExecutivePers:ExtetadAllcati[Articles73ad162readiththeVIIthScheduleftheCstitutifIdia]

4.10 TheexecutivepersftheUigvermetadthatftheStategvermetcrrespd ith the legislative per f the Ui Parliamet ad the Statelegislatures,respectively 8.Itisterthythat:

Thefuctisftheexecutivearetcfiedttheexecutifthelasmadebythelegislature,thughtheexecutivecatactagaisttheprvisisfala;

TheexecutivedesteedalatauthrisetheexercisefthepersvestediitbytheCstituti(subjecttaycstitutialrlegislativebars)9;

The State Gvermet may, ithut ay prir legislative authrity, makerulesrissueexecutiverders/tificatis/directismattersithithe

8 AsheldbytheSupremeCurtfIdiaithematterfRamJaayaKapur,RaiSahibversusStatefPujab,reprtedatAIR1955SC549.

9 AsheldbytheSupremeCurtfIdiainajudappa,RnversusThimmiahT,reprtedatAIR1972SC1767;adRamJaayaKapurcase(ibid).

c.

d.

a.

i.

ii.

a.

b.

c.


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legislativecmpeteceftheStateGvermet.Theexceptisbeigheresuchrulesrexecutiverders/tificatis/directisetc.:

affectafudametalright;r

vilateayprvisiftheCstituti.

Further,suchrulesrexecutiverders/tificatis/directisetc.illbecme

iperativeheayvalidlyeactedlatthectraryccupiesthefield.d. TheStateGvermethasexecutivepersirespectfthematterslisted

itheCcurretList,exceptheresuchpersareexpresslyvesteditheUiGvermetby:

theCstitutifIdiaitself;r

alamadebytheUiParliamet.

e. ItheevetthattheUiParliametpassesalairespectfaymatterlisteditheCcurretList,thesameilltdeprivetheStateGvermetfitsexecutivepers.IsteadtheexecutiveperftheStateGvermetirespectfthematteriquestishallbesubjecttadlimitedbythe

executiveperexpresslycferredupitbytheUiParliametritsauthrities.

4.11 Havigsaidthat,itisimprtatttethat:

Issuacefaplicydecisiitheabsecefaystatutrybasisfrthesamemaybesusceptibletlegalchallegeslimitedbutellestablishedgrudsadmaytrkreduceregulatryucertaityadbuildivestrcfideceiashrttimeframe;

wheretheexecutiveperiscferredrregulatedbystatute,theexercisefsuchpermustbelimitedbythetermsfthatstatute.otheehad,

thestatutryfudaticlthestheactiithlegitimacy,hilethetherhaditffersareferecepitfrchallegetayactitakectrarytthebjectivesrexpressprvisisfthestatute.

4.12 Ictextfhathasbeediscussedabve,thereise-size-fits-allapprachta suitable legal framerk.Differet cutriesadStatesi Idiahavetakequite divergetapprachest bth theistitutial arragemets ad the legalframerkfrPPP.otheehad,mstIdiaStatesprceededtimplemetPPPthrughplicyframerkadgeeralcmmerciallas.SmeIdiaStateslike,Gujarat,Pujab,adAdhraPradesh 10,haveeactedifrastructuredevelpmetlas t facilitate ivestmet by the private sectr i ifrastructure. Himachal

Pradeshhasalseactedaifrastructureeabligla.whileGujaratasthefirstIdiaStatetitrducesuchala,theAdhraPradeshadPujablasaremrecmprehesive.ThelasfthreeStatesareaalysediAppedixVIheret.Itisterthythat:

Thevariuslasicludeaumberffeaturesicmm,icludig:

TheestablishmetfasigleagecyithrespsibilityfrdevelpigadsupprtigPPPprjects;

Thecreatifaifrastructurefud,tcvercstsassciatedithdevelpigPPPprjects;

10TheGujaratIfrastructureDevelpmetAct,1999;thePujabIfrastructureDevelpmetAct,1998,replacedi2002bythePujabIfrastructureDevelpmetadRegulatiAct;ad theAdhraPradeshIfrastructureDevelpmetEabligAct,2001.

i.

ii.

i.

ii.

a.

b.

a.

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RulescverigbthcmpetitivetederigaddirectegtiatifPPPprjects.

b. Hever,therearesigificatvariatisamgstthem,icludig:

Regulati f charges uder PPP prjects: The Pujab IfrastructureLaestablishesthePujabIfrastructureRegulatryAuthrity,hichestablishesratesfr ccessiairesadadjudicatesdisputesbetee

ccessiaires.Thetheractsdtestablishaysuchetity;

Dispute resluti betee the ccessiaire ad the public etitygratigtheccessi:TheGujaratActdestmakespecificprvisifr this, the Pujab Act requires the use f arbitrati ad icludesa mdel arbitrati clause ad the Adhra Pradesh Act establishes aCciliatiBard;

Uslicitedprpsals:TheGujaratActdestprvidefrthese,thePujab Act permits them ad the Adhra Pradesh Act permits themsubjecttaSissChallegeprcess.

4.13 IatherIdiaState,MadhyaPradesh:Thelegislatureeactedtlastfiaceifrastructureprjects,beig:

MadhyaPradeshAdhsarachaViidhanidhiBardAdhiiyam,2000tfferrepaymetguarateesfrprivatesectrivestmets;

MadhyaPradeshIfrastructureIvestmetFudSchemeAct,2001.

b. TheMadhyaPradeshEcmicDevelpmetBardhasgeeralrespsibilitiesfrbthpubliclyadprivatelyfudedifrastructureprjects,hileMadhyaPradesh Idustrial ad Ifrastructure Develpmet Crprati has therespsibilityfrimplemetigadfacilitatigPPPs;

c. It is iterestig t te that Madhya Pradesh des t have a geeralIfrastructureeabliglafrPPP.AReprtbyAsiaDevelpmetBaksmeIdiaStates(icludigMadhyaPradesh)statedthat:

AIfrastructurePrivatisatiActasmetiedasameastprvideabetterevirmetfrprivateivestmetsiifrastructureadtitrduceatrasparetprcessfrprjectprivatisati.Hever,suchaacthastbeedrafted11;

MPshuldreviethedraftMPPSPEabligActadamedasecessaryfrcsideratifthestatelegislature;

TheGvermetfMadhyaPradeshisalsstatedthaveagreedtd

siaetthreeyeartimeframe12.

4.14 Bethatasitmay,itappearsthattheflligaspectsareimprtatcsideratisiarrivigataapprpriatelegal-regulatry-plicyframerkfrPPP:

Theframerkshuldtbeprescriptive/rigidbutbeflexibletaccmmdatediversefrmatsfPPP-aspersuitabilityfthesectradaprject;

Theframerkmustprvidefrabalacebeteeuiversalservice/life-liesupply,adviabilityfthesectr.Primeexamplesfthisare:

11ReprttitledPrivateSectrIfrastructureFacilityatStateLevelPrject,February2005,VlumeII,Page11ad12,

Secti2.5.12AtSecti8.1.5Page288fVlumeIftheReprttitledPrivateSectrIfrastructureFacilityatStateLevel

Prject.

iii.

i.

ii.

iii.

a.

i.

ii.

i.

ii.

iii.

a.

b.


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Tubig Para Sa Baragay prgram f the Maila water Cmpay(Philippies);

RuraltelephyadelectricitysupplyiBagladesh.

Theseprjectsarecharacterisedbyfcusprersectisfthecmmuityith largeclustersflicmefamiliesadillegal cectis.Yet theyhave bee successful i prvidig affrdable ad reliable supply thrugh

greaterdegree fcmmuityparticipatilike the lcal residetselfareassciatis,resultigisigificatefficiecygais.

5. Fundamental Principles Governing Contracting

in India

(As enshrined in the Indian Contract Act, 1872 and propounded in various judgements of

the Supreme Court of India and High Courts).

5.1 Havig examied the plicy ad ecmic imperatives; the gverig legal-regulatry-plicyframerk;thebalacebeteeelfareimperativesadviability;

asalsthePPPcstruct,thepresetChapterseekstlayutthebradpriciplesad parameters gverig eterig it ad efrcig ctracts i Idia. This isa practitiers summary fthe Idia CtractAct,1872 asiterpretedby thesuperirIdiacurts-butisbymeasmeattbeacmprehesiverexhaustivecmmetary.

5.2 Aagreemetcmprisesasetfreciprcalprmisesbypartiestd/abstaifrmdigsmethighichisefrceablebyla.

5.3 Tbeefrceablebyla,aagreemetmustbe:

madebyfreecsetfthepartiesttheagreemet;

fralafulcsiderati;ithalafulbject;

the parties must have agreed up the same set f reciprcal prmisesuderstdtbethesamethig/setfactivitiesbytheparties(csesus-ad-idem);ad

theagreemetMUSTbecertaiadascertaiable(tvague).

5.4 Freecsetrequiresthefllig:

ItmustbesigifiedbyapershiscmpetettCtract;

Suchpersmustbeftheagefmajrityaspertheapplicablela;

SuchpersbeigfsudmidatthetimefeterigCtract;Suchperstbeigdisqualifiedfrmctractigbyayapplicablela;

Thecsetmusttbecausedby:

cercirthreat;

udueIfluecebyehisiapsititdmiatethefreeillfthethertbtaiaufairadvatage/ucsciable;

fraudrdeceipttiducethecsetbymisrepresetatiractiveccealmetfmaterialfactsraprmiseithutitettperfrm,rtheracttdeceive;

misrepresetati,r

mistakeastaessetialmatterffactuderlyigtheagreemet,raylaifrceiIdia.

i.

ii.

a.

b.c.

d.

e.

a.

b.

c.d.

e.

i.

ii.

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5.5 Thecsideratiadthebjectsfaagreemetaretlafulicase:

itisfrbiddebyla;

itulddefeatayprvisisfapplicablela;

itisfraudulet;

itivlvesrimpliesijurytthepersrprpertyfather;

itisppsedtpublicplicy;ritisregardedasimmralbycurtfla.

5.6 Theflligagreemetsarevidadtefrceablebyla:

wherecsideratisadbjectstherefareulafulipart;

whereagreemetisithutcsiderati(thughadequacyfcsideratiisnoTaissue),excepthere

itisiritigadregistered,r

itisaprmisetcmpesatefrsmethigde,r

itisaprmisetpayadebtcausedbythelaflimitati.

c. Iftheagreemetisirestraitfayfthefllig,thesameshallbevid:

Restraitfmarriage;

Restraitftrade;

Restraitflegalprceedigs.

d. Ifagreemetisbyayfagerrisaagreemetctigetaimpssibleevet,itisvid.

e. Aagreemettdaimpssiblerulafulact,rhereactigetctractbecmesimpssiblerulaful(dueteffluxftimercduct)isvid.

5.7 Perfrmacefaagreemet:Aprmisemustbeperfrmedbythepershmadetheprmise,ulesstheprmiseeacceptsperfrmacebyathirdpers.Ithecasefjitprmiseby2rmreperss,theyareliabletperfrmhiletheprmiseeisfreetcallupermrefthemtperfrm.

Eachpartytactractmusteitherperfrmrffertperfrmitsprmise/sulessthesamehasbeedispesedithexcusedudertheapplicablela.Suchffertperfrmmustbe:

ucditial,

madeatprpertimeadplace,ad

madeudercircumstacesgivigtheprmiseeareasablepprtuitytascertaiprmisrsabilityadilligesstperfrmrverifythegdsbeigdelivered.

c. wheresuchffer hasbeemadead theffer hast bee accepted,theprmisristrespsiblefrperfrmace.Alssuchpartydestlseayrightsuderthectract,icludigrighttseekperfrmacebythetherparty.

d. nrmally,prmisesbidrepresetatives/estateftheprmisricasefdeathfprmisrbefreperfrmace,ulessactraryitetiappearsfrmthe

ctractlikehereperfrmaceislikedtaspecialtaletrtraiigfaprmisr(e.g.,surge,musiciaetc.).

a.

b.

c.

d.

e.f.

a.

b.

i.

ii.

iii.

i.

ii.

iii.

a.

b.

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e. whereapartytactracthasrefusedtperfrmrhasdisabledhimselffrmperfrmighisprmiseiitsetirety,theprmiseemaytermiatethectractrhemayacquiesceiitsctiuace.

f. wheretheagreemetspecifiesatimeadplacefrperfrmacefaprmise,it must beperfrmed accrdiglydurig rmal busiesshursuless theparties agreet a chage/variati.I caseshere time isspecified fr

perfrmace,itmustbeperfrmedithireasabletimeasperthefactsadcircumstacesfthatagreemet.Icasefambiguityrsilecere.placefperfrmace/time,theprmisrmayffertperfrmataplaceadtimefmutualcveiece.

5.8 PerfrmacefReciprcalPrmises:

Aprmisrisbligedtperfrmlyifthereciprcalprmiseeisreadyadilligtperfrmitspart.

Iftheagreemetsetsutasequecefperfrmacefreciprcalprmises,thatshuldbeflledstrictly.

Iftheagreemetdeststipulateasequecefperfrmacefreciprcalprmises, they shall be perfrmed i the sequece that the ature f thetrasactirequires.

If a party prevets the ther frm perfrmig his prmise, the bstructrreders the agreemet vidable at the pti f the bstructed besidesclaimigcmpesatifraylsssufferedduetsuchperfrmace.Thisisparticularlyshereduetstipulatedsequeceriheretatureftheprmisesthebstructrfails/refusestperfrmhisprmisetherebyprevetigperfrmacebythetherparty.

whereaprmisrbligedtperfrmaprmiseatrbefreaspecifiedtime

failstperfrmbythattime,theagreemet(tthatextetftheuperfrmedparty)becmesvidableattheptiftheprmiseeicasetimeasftheessecefthectract.Hever,iftimeistftheesseceftheagreemet,thughtheagreemetistvidablebuttheprmisrisbligedtcmpesatetheprmiseefrfailuretperfrmasperstipulatedtime.

Iayvidableagreemet,iftheprmiseeacceptsalterateperfrmacetheheistetitledtclaimcmpesatifrlsscausedduetperfrmaceia timely maer, uless atthe time fsuchalterate acceptace hegivesticefitetitclaimdamages.

5.9 Releasefrmbligatitperfrmitsprmisesuderaagreemethere:

Prmiseedispesesithrremitsperfrmacefprmise;Theprmiseefails,refusesreglectstaffrdttheprmisrreasablefacilitytperfrm;

Theagreemethasbeerederedvid.Isuchcircumstaces,thepershhasreceivedayadvatageudersuchagreemetisbudtrestreit,rtcmpesatethepersfrmhmhereceivedit;

The agreemet has bee termiated ce it became vidable. The partyrescidigagreemetshall,ifhereceivedaybeefitthereuderfrmatherparty,restretthepersfrmhmitasreceived.

5.10 PrivityfCtract:whiletheIdialaadefrceabilityispredicatedupprivityfctract,aitededbeeficiaryudertheagreemetisrmallypermittedby

a.

b.

c.

d.

e.

f.

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curtsflatseekefrcemetfhisclaimsuderthectractevehehe

mighttbeapartytheret.

5.11 Quasi-CtractualRelatiships:Restituti:

whe ay pers lafully des aythig fr ather pers, r deliversaythigthim-titedigtdsgratuitusly-suchthatthetherpersejysthebeefittheref,thelatterisbudtcmpesatethefrmerrtrestrethethig/beefit;

wheapersfurishesecessities/suppliestatherperssuitedthis

cditiilife,buttherecipietisicapablefeterigitactract-the

supplier is etitled t be reimbursed frm the prperty f such icapable

pers;

whemeyispaidraythigdeliveredtapersbymistakeruder

cerci,thatpersmustpayrreturit.

5.12 BreachadCsequeces:

The fudametalpriciple isthatthepartyhsuffersdue tbreachfactractbyatherpartyisetitledtcmpesati(beigrestitutiveadtaidfall)fraylssrdamagecausedthimhichlss/damage:

iscausedbysuchbreachadarseaturallyiusualcursefthigsfrmsuchbreach,r

thepartieskehetheyeteredittheagreemetthatituldbe

likelyresultfbreachftheagreemet.

b. ordiarilycmpesatiistpaidfrayremteridirectlss/damage,

ulessspecificallyagreedt.

c. Iestimatiglss/damagearisigfrmbreach,curtscsiderthemeasthat

existedfremedyigtheicveiececausedbytheperfrmacefctract.

d. wherethectractprvidesfraspecifiedamutastheliquidateddamages

rpealtypayableitheevetfbreach,thepartycmplaiigfbreachshall

beetitledtreceivecmpesati:

whichisreasableadrestitutiveiature;

whichshalltexceedtheliquidateddamages/pealtysspecified;ad

Beigthe liquidateddamages sspecifiedslgas the same ca be

establishedasafairadreasablemutuallyagreedcmpesatifr

suchbreach.e. whereapersgivesaybdrtheristrumetfrperfrmacefapublic

duty,itheevetfabreachbeshallbeliabletpaytheamutspecified.

f. Apershrightfullyrescidsactractis etitledtreceiverestitutivecmpesati fr ay lss/damage sustaied due t -fulfilmet f theagreemet.

5.13 DisputeReslutiMechaismgverigCtractsadClauses:

nrmally,adisputerelatigtvalidity,efrceability,iterpretatir-perfrmacefactractualbligatiuldbeacivildisputeadjudicated

up bya curtf cmpetet jurisdicti i its rigialside.The pssibleclaimsuldbefr:

a.

b.

c.

a.

i.

ii.

i.

ii.

iii.

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declaratifrightsadbligatis;

ijuctivereliefprevetigapartylikelytbreachfrmdigsadimpairigthelegalrights/statusftheclaimatuderthectract;

madatryijuctisfrefrcig/perfrmigctractualbligati;r

damagesfrcmpesatifrlsssufferedbyapartyduetbreach/-perfrmacebythether.

b. Duettheburdecurtsadthetimefactr,asalstheeedfrspecialisedkledge fr ifrastructure disputes (re. fiace, techlgy, ecmics,prject maagemetetc.), thetred has beetprvidealteratedisputemechaismdescribedbeladexcludejurisdictifcurtsfla.

c. whiletheIdiaCtractActhldsthatayagreemetiabsluterestraitflegal prceedigsis vid,it carves ut aexceptit save agreemetshereiitisagreedthat:

aydisputearisigiter-separtiesirespectfaysubject/sshallbereferredtarbitrati;ad

ly the amut aarded i such arbitrati shall be recverable irespectfthedisputesreferred.

d. Based the UnCITRAL Mdel Arbitrati La, the Arbitrati adCciliatiAct,1996prvidesfr:

n-bidig cciliati ad mediati hich are recgised asAlterate Dispute Resluti mechaism uder the Cde f CivilPrcedure,1908;ad

Bidigarbitratiithrestricted/limitedgrudsfchallegeadtimebudefrcemet.

e. ItisrmallyseethatprjectagreemetsfrPPPiifrastructuredevelpmetprvidefr:

o-gigCsultati/CrdiatiCmmittee;

Resluti f day-t-day issues thrugh Idepedet Egieer adIdepedetAuditr;

Timebudcciliatiatseirmaagemetlevels;

ReferecefdisputestaexpertbdybeigtheDisputesReslutiBard(DRB)frtimebudadjudicati,hsedecisiuptafiaciallimitillbefialadbidig;

Referece fdispute tarbitrati icase fDRB decisi ivlvigclaimsexceedigthematerialitythreshldspecified.

f. Varius High Curts have tified their MediatiRules t tryad reslvedisputes that have a chace f quick resluti thrugh curt appitedmediaticetres.

5.14 EmergecefSectralRegulatrs:Statutryexpertithpersicludigdisputeresluti:

VariussectrallasliketheElectricityAct,2003havecstitutedidepedetmulti-discipliaryexpertecmicregulatrsvestedithperstadjudicate

up disputes amgst regulated utilities, r refer sme such disputes tarbitrati;

i.

ii.

iii.

iv.

i.

ii.

i.

ii.

i.

ii.

iii.

iv.

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Themeritfthismechaismliesitheflligfactrs:

Curtsfladtrmallyiterferedithsuchexpertadjudicati;

Theregulatris cmprisedfsectrfcussedtechical,fiacial,legaladtherexpertise,besidespermaetsecretariathichhasextesivedatarelatedtthesectr;

Beigspecialised,they are madatedby la tdecide mst cmplexissuesafterpublichearigsiatimebudmaer, e.g.,itariffsettigtheregulatrhas120daystdecideafterreceivigacmpletefilig;

Appeals agaist decisis f the regulatr lies ithi 45 days befreather multi-discipliary expert appellate authrity (ith qurumcmprisigatamiimum,ajudicialadatechicalmember)hichagaiisrequiredtdecideallmattersithi180daysffilig.

c. Tevlvecsistecy i apprach diverseissues facedbythe sectr,astatutryfrumfregulatrshasbeecstituted.ThisalgiththefactthatallregulatrsiStatesadatCetrallevelhaveeappellatetribualhasledtaveryquicksettligfjurisprudecevariusissues.

d. Itisterthythaticreasiglyallregulatrsaredecidigissuesia timebudmaer,asistheappellatetribual-duethichtheghstf20yeartrack t dispute resluti has bee exercised ith mst matters gettigreslvedupttheSupremeCurtithi2t3yearsftheiriitiatibefretheregulatr.

5.15 Aillustrative/idicativeutliefaccessifrPPPiifrastructureprjectissetutiAppedixVIheret.

5.16 AverviefsmechallegesbeigfacediacredibleadtimebuddisputereslutimechaismfrPPPiifrastructureprjectsshallbesharedthrugha

cuplefcasestudiesdurigthewrkshp.

6. Evolving Jurisprudence Republic Private

Partnership in Infrastructure Projects

6.1 while private participati i develpig ifrastructure facilities ad rederigpublicutility/ifrastructureserviceshasbeeivguesicetimeimmemrial,pstidepedece(1947)theresurgecefprivateparticipati/rleithisspacetkplacesice1990s.Eveithemderera,variusstadardmaualsadprcedureshavebeeivgueiIdiafrprcurigcertaigdsadservicesfrmprivate

ctractrsfrverahudredyears,likethePublicwrksDepartmetCde.Itheabvectextcertaifudametalpillarsfjurisprudeceevlvedvertimehicharerelevattthepresetaalysisaresetutbel.

6.2 PublicPrivateParticipatiaditsrecgitibycurts:PublicPrivatePartershiphas bee give due recgiti by the Curts i Idia iasmuch as the HbleSupremeCurthasheldthatTdaypublicprivateparticipatiisakeyelemettdevelpifrastructureiurecmyadthepublicprivateparticipatiistherderftheday13.

13(2007)3SCC33-DERCversusBYPL;(2008)9SCC552-SraramPratapReddyadthersversusDistrictCllectr,RagaReddyadthers;Judgemetdated03.11.2008passedbyaDivisiBechftheHbleHighCurtfDelhiiwP(C)566f2008titlednatialHighaysBuildersFederativersusthenHAIadthers.

b.

i.

ii.

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6.3 Judicial revie public plicy qua divestiture ad public prcuremet14: TheHbleSupremeCurthaslaiddpriciplesithregardtscpefjudicialiterfereceithGvermetPlicydecisis(icludigdisivestmetadpublicprcuremet)beig:

Thecurtsiexerciseftheirjurisdictiillttrasgressitthefieldftheplicydecisi.whetherthaveaifrastructuralprjectrtad

hatisthetypefprjecttbeudertakeadhithastbeexecuted,arepartfplicymakigprcessadthecurtsareill-equippedtadjudicateaplicydecisisudertake.Itistfrthecurtstexamiehethertheplicyfdisivestmetisdesirablert.

Itiseitherithithedmaifthecurtstthescpefthejurisdicti,judicialrevietembarkupaequiryas thetheraparticularpublicplicyisiserhetherbetterpublicplicycabeevlved.

Prcess f disivestmet is a plicy decisi ivlvig cmplex ecmicfactrs,curtsmustrefraifrmiterferigiththeecmicdecisiuless:theecmicpsitibasedtheecmicexpedieciesisdemstrated

tbesvilativefcstitutialrlegallimitperrsabhrrettreas,thatthecurtsulddeclietiterfere.

Iademcracy,itistheprergativefeachelectedGvermettfllitsplicy.ofteachageiGvermetmayresultitheshiftifcusrchageiecmicplicies.Aysuchchagemayresultiadverselyaffectigsmevestediterests.Ulessayillegalityiscmmitteditheexecutiftheplicyrthesameisctrarytlarmalafide,adecisibrigigabutchagecatpersebeiterferedithbythecurt.

wisdmadadvisabilityfecmicpliciesarerdiarilytameabletjudicial revie uless it ca be demstratedthat the plicy is ctraryt

aystatutryprvisirtheCstituti.Itherrds,itistfrthecurtstcsiderrelativemeritsfdifferetecmicpliciesadcsiderhetheraiserrbetterecabeevlved.Frtestigthecrrectessfaplicy,theapprpriatefrumisParliametadtthecurts.

Ithecasefaplicydecisiecmicplicymatters,thecurtsshuldbeverycircumspecticductigayequiryrivestigatiadmustbemstreluctattimpugthejudgmetftheexpertshmayhavearrivedatacclusiulessthecurtissatisfiedthatthereisillegalityithedecisiitself.

Belated petitis shuld t be etertaied. Further, it is public iterest

t expedite dispsal f cases ivlvig challege t ecmic plicies adifrastructureprjects-asaydelayill becuterprductiveadctrarytpubliciterest.

Thedutyfthecurtistcfieitselftthequestiflegality.Itsccershuldbe:

hetheradecisi-makigauthrityexceededitspers;

cmmittedaerrrfla;

cmmittedabreachftherulesfaturaljustice,

14(2002)2SCC333-BalcEmplyeesUiversusUifIdiaadthers;(2000)2SCC617-AirIdiaLtd.VersusCchiIteratialAirprtLtd.

a.

b.

c.

d.

e.

f.

g.

h.

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reached a decisi hich reasable tribual uld havereachedr,

abuseditspers.

i. Amegaprject(Bagalre-MysreIfrastructureCrridr)isilargerpubliciterestftheStateadmerechagefGvermetdestecessitatereviefdecisistakebythepreviusGvermet15.

j. Itistfrthecurtstdetermiehetheraparticularplicyrparticulardecisitakeithefulfillmetfthatplicyisfair.Theyarelyccerediththemaerihichthsedecisishavebeetake.Theextetfthedutytactfairlyillvaryfrmcasetcase.Shrtlyput,thegrudsuphichaadmiistrativeactiissubjecttctrlbyjudicialreviecabeclassifiedasuder:

Illegality:Thismeasthedecisi-makermustuderstadcrrectlythelathatregulateshisdecisi-makigperadmustgiv

dea ppp criticality legal(1)

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