At a time when the government is trying to revive private-funded highway building, an association of highway developers has asked the Road Transport and Highways Ministry to reconsider several provisions of the revised build-operate-transfer (BOT)-Toll model.
BOT-Toll refers to one of the public private partnership models of the government where the developer finances and executes the entire project on its own, realising its investment through toll collections over a concession period.
In a letter to highways secretary V Umashankar on Tuesday, the National Highways Builders Federation (NHBF) said that “certain fundamental issues relating to risk allocation, project viability, and financial sustainability still remain unresolved” with the revised model concession agreement, identifying 16 critical clauses requiring changes.
The revised agreement was announced just nine days ago, in response to earlier stakeholder concerns over its older version.
The chief concern of the highway developers’ body is related to the arbitration clause.
In accordance with finance ministry guidelines, the revised agreement says that any disputes over ~10 crore will not go into arbitration but through a conciliation mechanism.
The restriction, according to the letter, creates significant concern for investors and lenders in large-value, long-term contractual obligations.
The association asked the government to remove the flat monetary restriction on arbitration and permit disputes to be resolved through an appropriate ad-hoc or institutional arbitration framework to ensure an effective and time-bound resolution.
The ministry introduced this clause after the finance ministry issued guidelines to reduce arbitration in public procurement.
Sector experts disagree on its applicability. “The guidelines are not binding. Railways still does arbitration,” a senior industry executive said.
At an industry event by the Federation of Indian Chambers of Commerce & Industry (Ficci) in Delhi on Wednesday, Afcons Infrastructure managing director (MD) Paramsivan Srinivasan echoed the same concern to Union minister Nitin Gadkari.
He said India cannot aspire to be the hub of arbitration but shy away from arbitration for its own contracts. This, he said, is a “big dichotomy.”
Separately, NHBF has also asked the government to reconsider provisions on concessionaire default with respect to drop in traffic on the highway stretch.
