Montek asks private sector to contribute US$ 500 billion for infra projects

NEW DELHI: Montek Singh Ahluwalia, Deputy Chairman, Planning Commission, has made it clear that the GDP growth target of 8 per cent during the 12^th Plan period would have to be scaled down if the private sector fails to contribute half of the estimated US$ 1 trillion investment in infrastructure development.

Inaugurating FICCI’s India PPP Summit 2013 on Monday, Ahulwalia said, “Private sector participation in infrastructure PPP projects have grown substantially from 10 per cent of the required investment in the 10^th Plan period to 37 per cent during the 11^th Plan. In the 12^th Plan period (2012-2017), no less than 50 per cent of the estimated investment would have to necessarily come from the private sector as there are zero prospects of the government being able to finance such projects. If it can’t be done then we had better lower the growth projection.”

He urged the private sector to share and absorb the risks that are normally associated with model concession agreements under the PPP model and expressed his regret that very little thinking has been done by the private sector on such agreements.

On the issue of non-delivery of statutory clearances on time for PPP projects, a clear thinking has to emerge on what a concession agreement should entail. Any penalty to be imposed on the government, would be resisted within the government, he said and added that due diligence in the matter was required to be done in the next two years.

He urged the private players to figure out how ‘force majeure’ provisions in concession agreements are to be handled. It is important to clearly spell out what exactly is needed to be built in by way of ‘force majeure’ in contracts.

Most contracts contain force majeure provisions although they are not generally considered in detail by companies when they are negotiating a contract. As they are drafted to cover unusual or unexpected events they are not frequently relied upon.

In his special address, Dr. Arvind Mayaram, Secretary, Department of Economic Affairs, Ministry of Finance, underlined the need for adequate resources to maintain the existing infrastructure, while scouting for funds for creating new assets.

He said both the government and the private sector were beset with the problem of lack of institutional capacities to management concession agreements over a 20-year period and it was high time to have a re-look at such capacities for managing and maintain ing PPP projects.

He said once the construction of a project is over and it gets stablised, there should be easy exit for a developer and the ease for a competent facility manager to come in.

Dr. Mayaram also emphasized the need for more regulators of different infrastructure sectors

with clearly defined Terms of Reference. “Regulators have to be empowered and be independent of both the parties to a contract,” he said.

The inaugural session was also addressed by Hari Sankaran, Chairman, FICCI Infrastructure Committee and Managing Director, IL&FS; Dr. A Didar Singh, Secretary General, FICCI and Mr. Abhaya Agarwal, Partner and Leader - PPP, Ernst & Young LLP.