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Tuesday, 02 July 2013 00:00
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RInfra’s desire to exit the airport metro underscores the need to have effective dispute resolution for PPPs

 

Given the sharp dip in economic fortunes, an increasing number of PPP projects are now getting transformed into the old cost-plus projects. While Lanco’s 1,200 MW Anpara C being taken over by the UP government is a good example from a few months ago, with RInfra walking out of the Delhi Airport Metro Express, the project will now be taken over by Delhi Metro which is a governmental organisation. The project has gone into arbitration with RInfra walking out due to what it said were defects in the original construction by Delhi Metro—a view reinforced by a government committee. Delhi Metro, on the other hand, has argued that even if there were defects in the original construction, these have been rectified and so there is no case for RInfra to walk out.

The fact that the line has not lived up to its original promise of traffic has not been cited by RInfra for walking out, but that could well be a factor influencing its decision. Given that PPP projects are increasingly falling out of favour—both the GMR and the GVK groups have walked out of projects citing delays on NHAI’s part in getting clearances—the government quickly needs to find some solutions. A rough-and-ready one could be to fix tolerance limits—say, traffic falling above or below the projections by 20% or economic growth falling above or below projections by 1 percentage point—after which automatic renegotiations would be mandatory. Lengthy disputes benefit no one.

 
 

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