New Delhi: India’s finance ministry is considering hiring lawyers who can advise states entering into partnerships with private sector firms to undertake infrastructure projects as many of the states have no experience in negotiating contracts involving sharing equity, resources, and revenues with such firms.
Several Indian states are moving towards the so-called PPP or public-private-partnership model to build infrastructure. However, in some cases, government officials miss the fine print in their contracts with their private sector partners — this has resulted in disputes in some recent instances, such as a dispute between the Airports Authority of India and the GMR-backed Delhi International Airport Pvt. Ltd (DIAL), the private developer operating the New Delhi airport over financing plans.
Across states, there are 244 PPP infrastructure projects that are works in progress; together, the value of these projects is Rs34,724 crore.
“We have already written to six law firms. It’s a time-consuming process,” said a finance ministry official, who did not wish to be identified.
The law firms will be put on a retainer, where the government reserves the right to use their services at pre-negotiated rates; the states can use the services of these firms.
Analysts say hiring the law firms would be a good move because while most states have experience with so-called procurement contracts, where state agencies give out infrastructure building work to sub-contractors, they have very little experience with contracts where private firms own stakes in such projects.
“In many ways, I think India is almost ahead of other countries when it comes to PPPs...,” said Jayesh Desai, director of consulting firm Ernst and Young Pvt. Ltd.
The Planning Commission, India’s apex planning agency estimates that the country needs around Rs20 trillion in infrastructure investments over the next five years, of which nearly 30% has to be contributed by the private sector.
The finance ministry’s plan to retail lawyers is part of an Asian Development Bank-funded technical assistance programme for capacity building in PPPs, said a finance ministry official who did not wish to to be identified.
“States will be free to consult the lawyers and they will be paid for services to the states at a predetermined rate,” the official added.