Public private partnerships and contractual risks: An Indian-European perspective

Abstract

Public Private Partnerships (PPPs) have been hailed universally as a boon for rapid development in social and physical infrastructure. A number of projects are being done through PPPs nowadays and it becomes imperative that these projects succeed for the long term well-being of a country and its economy. This beckons for an effective understanding of a typical PPP arrangement and the founding contractual framework associated with the lifecycle of the project. World Over, PPP projects have been implemented in various forms such as Physical infrastructure (Roads, airports, bridges) and Social infrastructure (Education, Healthcare). Some of these projects are successful in terms of delivering the benefits to the people to the fullest extent and also being profitable for the private player. However, several projects have had severe road blocks or have had to be abandoned midway due to a variety of issues ranging from the private player unable to fund the project to the project getting held up due to legal issues. In this project, we have studied and compared the contractual structure of PPP projects in India and Europe, specifically France. One major difference which we found in the PPPs of India and those of Europe is that the Indian PPPs turned out to be really large, and would result in a very large effect on the masses. We have looked at the cases of The Delhi Airport Project and the NICE project for studying the Indian PPP side, and to understand the European context, we have made a study of the Eiffage Project. The Delhi Airport project has delivered lots of benefits to the general public, but has been marred by controversy, while the NICE project has not been able to take off very well due to problems in the contract structure and outcry from the public. Hence, the Indian examples are more towards PPP projects which have not been very successful. On the other side, the European project considered for the study is hugely successful. Out of these cases, we have brought about what were the key factors which led to the success or failure of these projects. While in the Indian cases, the contracts that were there did cause a number of issues which led to their failure, the French example’s contract structure did an efficient allocation of the risks involved in the project. We have also studied issues like does there need to be multiple agreements in case of a PPP, should the government transfer the light of the land to the private party, whether a regulator for all PPPs help in making them more successful and how does one balance and play with the negotiating capacity of the parties. We believe that the issues discussed here can be the starting point of how the government and the private players can come together to form successful public private partnerships so that these serve the cause for which they are formed, that is the betterment of the economy and the nation.