Article

Rethinking Dispute Journal of Infrastructure Development

5(1) 21–32
Resolution in Public–Private © 2013 India Development Foundation
SAGE Publications
Partnerships for Infrastructure Los Angeles, London,
New Delhi, Singapore,
Development in India Washington DC
DOI: 10.1177/0974930613488292
http://joi.sagepub.com

Harisankar K.S.
Assistant Professor of Law, National Law University
Jodhpur, India, harisankar.nlu@gmail.com

Sreeparvathy G.
Assistant Professor of Law, National Law University
Jodhpur, India, sreeparvathy.g@gmail.com

Abstract
Public–Private Partnership (PPP) has been a relatively successful model for infrastructure development
in India. However, investment of private capital, especially foreign investment, is far from satisfactory
keeping in mind the estimated investments of the Government under the XIth and XIIth plans. Several
issues have been identified which include, evolving a robust legislative framework and a well-balanced
concession agreement. A major area of concern at the stage of contract management is the setting up
of an efficient and credible dispute resolution mechanism which would ensure settlement of disputes in
a time-bound manner. Apart from litigation, several alternative modes are being followed in India like
amicable settlement, mediation, arbitration and expert adjudication. This article analyses the various
practices of dispute resolution mandated in central and state legislations, policy documents and industry
practices. In an attempt to suggest the most viable approach to dispute resolution in core infrastructure
sectors, it will also establish the inter-relationship between private investment and dispute resolution
mechanisms.

JEL Classification: O, K, Y

Keywords: Arbitration, dispute resolution, public–private partnerships

1. Introduction

With a consistent economic growth of 8 per cent per annum, India, according to many experts, is poised
to grow faster than China by the end of 2012. Creation of a world class infrastructure remains one of the
high priority areas for the country, if it has to move steadily in its current growth trajectory. This explains
the high infrastructure investment, the union government has proposed in the XIth and XIIth plan esti-
mates.1 Investment of such high magnitude would not be possible without the participation of the private
22 Harisankar K.S. and Sreeparvathy G.

sector and hence, as Dr Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister
puts it, ‘…increasing the investment in infrastructure through the public–private participation model’ is
one of the key challenges of the Indian economy.2 In addition to bridging the fiscal deficit, involvement
of private sector brings along the much desired advantages of technical expertise, cost effectiveness and,
efficiency in operation and management.
The Public–Private Partnership (hereinafter PPP) model, first adopted in India for delivering infra-
structure projects more than a decade back, has emerged as a huge market. This is attributed to various
factors like the presence of a strong domestic demand, a huge pool of natural and human resources, cost
effectiveness and a strong democratic set up (Raju 2011: 105). However, Indian experience can only be
regarded as relatively successful keeping in mind its need and potential for attracting private capital.
Moreover, Indian PPP, dominated by domestic investors—both in terms of the number of projects and
the value of investments—have been successful in attracting only a negligible number of foreign inves-
tors, even after the government has allowed 100 per cent Foreign Direct Investment (FDI)3 in most of the
core infrastructure sectors.4 This becomes more apparent if one compares FDIs in India with that of other
developing economies, like Brazil and China.5 Regional disparities in attracting PPP with relatively poor
states having no or minimal success in attracting private investment is also a matter of concern. The
government’s inability to address social and political issues in a comprehensive manner, ensuring the
constitutional mandate of ‘social and economic justice’ has often created stumbling blocks in attracting
more private partnerships.
A key pre-requisite for attracting private partnership is identified as laying down ‘a policy, and a
legal and regulatory framework that assures fair return for investors and protects the interests of the
users, especially poor and assures quality at a reasonable cost’ (GoI, The Indian Economic Survey,
2009–10, 2010a: Chap. 10, p. 266). The Government of India and various state governments have
been consistently making efforts to bring clarity to policy and regulations by inter alia modifying
policy documents, providing for model contract documents and mechanisms for financial structuring
(ibid.). It has, of late notified standardised bidding and contractual documents for various sectors. In
addition, the union government has, in 2011 come out with a draft policy and rules regarding the same.
There is also some talk regarding the setting up of an entity to coordinate all efforts of PPP, apart from
the existing Public–Private Partnership Approval Committee (PPPAC) and other legal and policy
frameworks.
One area repeatedly emphasised by all the major policy frameworks and model contract documents is
the provision for an efficient and credible dispute resolution mechanism. However, even in the latest
draft rules, the government has fallen short of providing any detailed guidelines regarding dispute reso-
lution and safeguarding it from the lengthy litigation process as far as possible. If we go by the Chaturvedi
Committee Report on the faster implementation of the National Highway Development Project (NHDP),
an investment to the tune of `10,000 crore is held up in the NHDP alone, on account of the disputes
between the National Highway Authority of India (NHAI) and the contractors.6 Resolution of disputes
being a major concern for private investment in infrastructure, this article seeks to examine the dispute
resolution mechanisms available under the various state and central legislations, regulations and industry
practices in an attempt to put forth suggestions for improving their efficacy. Part II of the article gives an
overview of the PPP model as originated and existing in India. Part III explains the significance of a
dispute resolution mechanism in PPP and goes on to a critical examination of the existing mechanisms
on the touch stones of cost, time and efficacy. Part IV as the title indicates is the conclusion where the

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Infrastructure Development in India 23

authors on the basis of the analysis done identifies the bottlenecks and suggest certain measures for the
improvement of dispute resolution vis-à-vis PPP.

2. Public–Private Partnership—The Indian Experience

2.1 PPP in India—A Brief Overview

PPP is generally understood to mean the participation of private sector in the creation or facilitation of
public services. The Draft National PPP Policy, 2011 identifies two requirements for an arrangement to
be called a PPP—(a) arrangement with a private sector entity; and (b) for the provision of public assets
or services.7 Initiated as a part of ‘liberalisation–delicencing and privatisation’ regime of 1990, India has
had a remarkable record of mainstreaming private capital and moulding it to suit the huge demand for
infrastructure development, especially in sectors like highways, telecommunications and ports. Union as
well as the state governments have taken constant efforts to encourage private investments and minimise
the bottlenecks through policy initiatives and regulatory frameworks. Such efforts include standardising
contractual documents as sector specific model contracts or concession agreements, setting up of insti-
tutional mechanisms like Indian Infrastructure Finance Company Ltd (IIFC), India Infrastructure Project
Development Fund (IIPDF), etc., establishing a streamlined system of clearance of PPP projects devel-
oped by central agencies through setting up of PPPAC, relaxing restrictions on FDI in most infrastructure
sectors and fiscal incentives including tax holidays under the Income Tax Act and various state statutes.
Various state governments such as Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Jharkhand,
Karnataka, Kerala, Maharashtra, Orissa, Rajasthan and West Bengal, have adopted PPP policies
(Government of India, The Indian Economic Survey, 2009–10, p. 266) and many of them have put in
place the necessary institutional mechanisms for the promotion of PPP.

2.2 Regional and Sectoral Disparities in Private Partnership—Key Challenges

The PPP model has not been a uniform success story all throughout. There are clear regional and sectoral
disparities both in terms of the number of projects and volume of investments. While sectors like high-
way and port development have gained the maximum out of PPP model, possibilities in sectors such as
education, health etc. largely remains under-utilised (see Table 1). As mentioned by one study

if ports and central road projects are excluded from the total, in fact relatively small value of deal flows, at
only Rs 45,067 crore in basic infrastructure PPPs to-date, suggesting a significant potential upside for PPP
projects across sectors where states and municipalities have primary responsibility. (Sathana Priya and
Jesintha 2011)

Again there exist sharp disparities in terms of number and volume of investment through the PPP
model if one analyses the state-wise distribution of PPP (see Table 2). Several factors such as economic
condition of the state, law and order problems,8 land acquisition issues, lack of clear policy and regula-
tory frameworks, political ideologies,9 lack of advocacy, etc., have been identified as causes for unequal
distribution of private investment within the country. Lack of clarity with respect to the legal and regulatory

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24 Harisankar K.S. and Sreeparvathy G.

Table 1. Sector-wise Figures

Between Between
Total Number Based on 100 to 250 251 to 500 More than Value of
Sector of Projects 100 Crores Crores Crores 500 Crores Contacts
Airports 5 — — 303.0 18808.0 19111.0
Education 17 424.2 365.5 460.0 600.0 1,849.7
Energy 56 337.6 934.0 3,083.0 62,890.0 67,244.6
Health Care 8 315.0 343.0 275.0 900.0 1,833.0
Ports 61 86.0 1,745.3 4,304.8 74,902.1 81,038.2

Railways 4 — 102.2 873.0 594.3 1,569.6

Roads 405 4,364.6 11,696.5 38,520.5 122,143.3 176,724.9
Tourism 50 1,132.6 1,503.5 800.0 1,050.0 4,486.1
Urban 152 2,812.0 3,136.9 6,688.2 16,838.0 29,475.0
Development
Total 758 9,471.9 19,826.9 55,307.5 298,725.8 383,332.1
Source: PPP India Database (www.pppindiadatabase.com).

Table 2. State-wise Figures

State No. of PPPs Value of PPP

Karnataka 104 44,658.9
Andhra Pradesh 96 66,918.3
Madhya Pradesh 86 14,983.4
Rajasthan 59 15,027.3
Kerala 32 22,281.5
Uttar Pradesh 14 26,595.8
Bihar 6 2,093.8
West Bengal 30 6,617.1
Source: PPP India Database (www.pppindiadatabase.com).

framework has been identified by many, including the union and many state governments as one key
issue creating apprehensions for the private investor.

2.3 Legal and Regulatory Framework

The legal framework for PPP in India ranges from the Constitution of India10 to rules and regulations noti-
fied from time to time by various state instrumentalities. In addition to legislations relevant to particular

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Infrastructure Development in India 25

sector like the National Highway Authority of India Act, 1988, laws governing normal commercial trans-
actions like the Indian Contract Act, 1872, Sale of Goods Act, 1930, Negotiable Instruments Act, 1881,
etc., will also have a bearing on PPP arrangements. In addition, various statutes governing dispute reso-
lution like the Code of Civil Procedure, 1908, Specific Relief Act, 1963 and Arbitration and Conciliation
Act, 1996 also assumes relevance.
There are different modes on the basis of which PPP arrangements work in India. They may broadly
be classified into three, namely11

1. Public ownership and public operation where the policy decision is to retain public ownership
and control over the sector; direct private financing and operation may be allowed under com-
mercial principles by vesting ownership and management on separate legal entities controlled
by the government.12
2. Public ownership but private operations where Operation and Management (O&M) activities may
be contracted out to the private sector.
3. Private ownership and operation where the private party owns and operates the facility.

3. Dispute Resolution: Managing Cost, Time and Efficacy

As already highlighted, existence of a credible and efficient dispute resolution mechanism (hereinafter
DRM), which can settle the differences in a time bound manner is one of the key factors for the success
of any PPP. In private investments, especially in those involving high capital, the perceived risks and
costs of delay in resolution of disputes can be fatal to the country. Provision for an effective-both in terms
of speed and quality- assumes relevance for PPPs taking into account the possible conflicts of interests,
long-term and high investments involved, political and social sensitivity often attached to the projects
etc. Thus it becomes imperative that the parties get the assistance of a body, with necessary technical,
financial and legal expertise, to settle their disputes in a time bound manner.

3.1 Disputes—When and How?

Before going in to an analysis of DRMs in detail, it would be worthwhile to mention in brief various
stages involved in the adoption and development of a project under PPP in order to understand when and
how a dispute can arise. Though there may be minor variations depending on the sectoral needs, various
stages in a PPP project implementation, are the following13:

1. Identification—It is the stage where potential projects are identified through a strategic planning
process and these potential projects are evaluated for their suitability for development as PPP.
2. Full feasibility—A potential PPP identified in the first phase is considered in detail and an applica-
tion is made for in principle clearance to continue to the procurement phase.
3. Procurement—The procurement process takes place, an application is made for final approval, the
preferred bidder is selected and the project is taken to technical close.
  Contract Management and Monitoring—Here, the Sponsoring Authority manages the PPP
throughout its life, including monitoring the private partner’s performance against the requirements

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26 Harisankar K.S. and Sreeparvathy G.

of the Concession Agreement. Phase 4 begins at the pre-operative stage, and spans the construc-
tion stage (where relevant), the operations stage, and contract closure and asset transfer (GoI
2010b: 4).

The need for dispute resolution arises mostly in contract management stage. But possibility of a dis-
pute arising cannot be ruled out even prior to that; say at the stage of procurement where the award of
project may be challenged on grounds of arbitrariness and illegality before courts of law. This is in addi-
tion to the public policy issues relating to land acquisition and environmental clearance that government
agency may have to sort out at an earlier stage. The judiciary in India has been candid in maintaining that
judicial review cannot extend to policy matters which are the prerogative of the government and it is in
public interest to expedite disposal of cases involving challenge to economic policies, as any delay will
be counter-productive to public interest. The duty of the court, maintains the Supreme Court, is only to
confine itself to the questions of illegality, irrationality and procedural impropriety.14 Hence, the courts
have generally restrained themselves from interfering in matters relating to bidding and award of projects
unless the arbitrariness and illegality is apparent on the face of it.15
At the stage of Contract Management, disputes essentially relates to the validity, enforceability, inter-
pretation or non-performance of a contractual obligation, or seeking injunctive relief, compensation,
specific performance, etc., may come up and thus amenable to the original jurisdiction of a civil court of
competent jurisdiction. However, litigation is not preferred as a mode of dispute resolution presumably
due to factors like potential delay and the need for specialised knowledge. The need for expert adjudica-
tion in issues arising out of infrastructure projects have been emphasised by the Supreme Court in UPSEB
v. Banaras Electric Light & Power Co. Ltd (2001, 7 SCC 637).

3.2 Alternative Dispute Resolution Mechanism—Various Models

Various methods of alternative dispute resolution like amicable settlement, conciliation mediation, arbi-
tration, expert adjudication, etc., are generally provided for in the concession contracts. Reference to
dispute settlement mechanisms are also made in model concession agreements promulgated by the union
government, sectoral legislations like the Electricity Act, and the state PPP legislations. The draft national
policy as well as the draft rules, promulgated by the government for public discussion, though sparse in
details, also recognise mutual discussion as the preferred mode of settlement of disputes. Some of the
states already have in place separate dispute resolution mechanisms (see Table 3). In addition to these
state legislations, the policy statements of various state governments also emphasise the need for setting
up of a robust dispute resolution mechanism based on ADRs.16
The following section discusses the various dispute settlement mechanisms available for PPPs in
India, though their form and priority may vary depending on the sector and the regulator.
(i) Amicable Settlement, Mediation and Conciliation
As PPP relies more on trust and partnership between the government agency and the private investor, it
has long been recognised that all the possibilities must be explored for amicable settlement of differ-
ences. Most of the concession contracts or the rules of the regulating authority provide for amicable
settlement of disputes between the parties through negotiation and conciliation.17 It can either be through

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Table 3. State Legislations Governing PPP

State Legislation Mode of Dispute Resolution

Andhra Pradesh Infrastructure A Conciliation Board is set up, which shall have the powers of a civil
Development Enabling Act, 2001 court. The settlement award shall have the same effect as that of an
arbitral award under the Arbitration and Conciliation Act, 1930. There is
a bar on the parties to resort to arbitral or judicial proceedings during the
conciliation procedure.
Bihar Infrastructure A Conciliation Board is set up which shall assist the Government Agency,
Development Enabling Act, 2006 or Local Authority and any Developer in an independent and impartial
manner to reach an amicable settlement of their disputes arising under the
Act or the Concession Agreement. Every proceeding before the Board
shall be deemed to be a judicial proceeding and it shall be deemed to be a
Civil Court. Jurisdiction of subordinate courts are barred by providing that
dispute settlement or dispute resolution in respect of any matters under
the Act shall be heard only by the High Court and by no other court or
courts subordinate to the High Court.
Gujarat Infrastructure No specific dispute resolution mechanism provided except mandating
Development Act, 1999 that a Concession agreement shall contain an arbitration clause providing
inter alia that all parties to the agreement shall submit to arbitration. No
procedure provided for selection of project or concessionaire.
Punjab Infrastructure Punjab Infrastructure Regulatory Authority, with powers of civil court to
Development and Regulation adjudicate disputes between two or more Concessionaires, operators
Act, 2002 of infrastructure projects, the State Government and the Board. Appeal
can be preferred to the High Courts. Punjab Infrastructure Development
Board, the apex and nodal agency to grant approval to projects or award
concession contracts. Appeal may be preferred against PIDB order in
HC. Bar on the jurisdiction of civil court where the Authority and Board
are given powers. The concession agreement must lay down methods of
dispute resolution including conciliation and arbitration.
Source: Authors’ compilation based on the legislations provided therein.

a consultation or co-ordination committee or through an independent engineer and auditor who will
ensure compliance with the contract on a day to day basis. The FIDIC18 form of contract provides for an
independent engineer who shall act as a balancer of interests by determining, certifying and approving
the manner in which the contract is administered. It is also relevant to note at this juncture that the
Second Report of the Chaturvedi Committee on the faster implementation of NHDP also emphasises the
adoption of FIDIC model in all kinds of contracts19 where the engineer holds a key role in the adjudica-
tion of disputes at the first level.20 In addition there is also the method of mediation where by the parties
can get their differences sorted out through a mediator appointed by the High Court under the particular
High Court mediation rules. Thus, resolution of differences at the earliest possibility through conciliation
or mediation would be highly desirable in terms of saving time and cost. However, it may be noted that,
success of conciliation and mediation being legally non-binding,21 depends on the flexibility and accept-
ance of the settlement by the parties.

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28 Harisankar K.S. and Sreeparvathy G.

(ii) Arbitration
Arbitration has of late become one of the most viable means of dispute settlement in disputes between
a concessionaire and the contract-granting government entity. Most of the concession agreements do
provide for arbitration evidently due to its relative advantages in terms of speedy disposal and techni-
cal know-how of the adjudicators. Though Section 28 of the Indian Contract Act holds any agreement
in absolute restraint of legal proceedings to be void, an exception is duly incorporated to safeguard
arbitration proceedings.22 It is significant to note here that the Punjab Infrastructure Development and
Regulation Act, 2002 makes arbitration mandatory (see Table 3). Arbitration in India is governed by
the Arbitration and Conciliation Act, 1996, which is based on the UNCITRAL model law. It provides
the framework for legally binding arbitration awards with limited grounds for challenge in a time
bound manner. It may also be noted that in addition to the ad hoc arbitration tribunals that the parties
may by agreement constitute, preference for institutional arbitration has also become prominent in
some sectors.
However, the efficacy of arbitration in resolving disputes in PPP model cannot be overemphasised. It
is pointed out that arbitration at times tend to be very time consuming and add to project cost and make
the environment for investment hostile. The Nathpa Jhakri Hydro-electric Project provides an illustra-
tion as to how arbitration contributes to project delay and escalation of costs. The project related to
construction of 1,500 MW hydro-electric dam across river Sutlej. Phase one of the contract involved
river diversion and some construction which was stipulated to be completed in a period of 56 months,
with a bid amount of `439.38 crore. The project ultimately got completed after 131 months with a cost
of `635.80 crore. Though delay was caused by a number of factors like geological conditions, change in
drawings, etc., the contribution of delay in arbitration was not negligible. A large number of claims were
settled by the Dispute Resolution Board (DRB), the parties did not accept its recommendations on
Extension Time claims (EoT) even after spending three years. The arbitral tribunal constituted to look in
to EoT in April 2005 awarded the contractor extension of time and costs on account of delay in May
2008. Finally payment was made to the contractor in November 2008 by settlement between the parties,
after 10 years from the date of scheduled completion of the contract, three years being contributed by a
delay in arbitration procedures.23
The intervention of courts in arbitral procedures is yet another concern. The case involving the Dhabol
Power Project, one of the biggest foreign investments in India in the 1990s, illustrates how intervention
by courts defeats the advantages of arbitration and contributes to projecting the country as investor-
hostile. Though India had by that time ratified the New York Convention and enacted the 1996 Act, both
the central and the Maharashtra state government preferred to avoid a settlement of the dispute by inter-
national arbitration which was duly agreed to in the relevant agreements.24 Even considering that there
were a number of issues like lack of transparency, allegations of corruption, environmental and other
human rights issues, which the government should have taken care of at the stage of award of the project,
refusal to submit the dispute to arbitration by the government agencies and the concomitant intervention
by the judiciary hindering the arbitration procedure have done considerable damage to India’s prospects
in the long run. Again, susceptibility of the award to judicial challenge will also make arbitration less
attractive. It is also pointed out that, as retired judges and practicing lawyers more often constitute the
panel, there is a tendency to stick to procedural aspects (Kapur, 2008: 159). This lack of flexibility has
often undermined the effectiveness of arbitration as an alternative mode.

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Infrastructure Development in India 29

(iii) Expert Adjudication

Adjudication by quasi-judicial bodies comprising of technical and legal experts with a provision for
appeal to a multi-disciplinary appellate body is becoming an increasingly preferred mode of dispute
resolution in PPP. This can predominantly be attributed to the emergence of sectoral regulators like
Central Electricity Regulatory Commission and the Appellate Tribunal for Electricity under the Electricity
Act, 2003 Expert adjudication has many advantages. The expertise of the regulator in the technical,
financial and legal aspects of a particular sector along with the existence of a secretariat with extensive
research data base proves to be an added advantage to the quality of dispute resolution. For instance, the
Central Electricity Regulatory Commission comprises of members having qualification and experience in
such diverse fields like engineering, finance, law, commerce and management.25 Additionally, the
Commission, in its capacity as the regulator has the functions of advising the government in major policy
matters and also assuring quality standards in the industry26 which naturally equip them with relevant
knowledge and expertise needed for adjudication.
Moreover the enabling statutes often provide for a statutory time frame within which the adjudicatory
authority has to give its decision. For instance, under the Electricity Act there is a stipulation of one
hundred and twenty and one hundred and eighty days respectively for the appropriate commission and
the appellate tribunal to decide matters involving tariff fixing27 and these specialised tribunals have more
often found to be sticking to time limit.28 It is also opined that setting up of the regulators at the state and
central level with one appellate authority has led to a very quick settling of jurisprudence on various
issues (ibid.). The approach of the judiciary has also been in favour of promoting expert adjudication.
For instance in Uttar Pradesh Power Corporation Ltd v. NTPC Ltd and others (2011[10] SCALE 499)
the Supreme Court held that

Central Commission constituted under Section 3 of Electricity Regulatory Commissions Act, 1998 is an
expert body which had been entrusted with the task of determination of tariff and as it involved highly techni-
cal procedure, requiring not only working knowledge of law but also of engineering, finance, commerce,
economics and management, the Court is firmly of the view that the issues with regard to determination of
tariff should be left to the said expert body and ordinarily High Court and even this Court should not interfere
with the same. (Supreme Court’s observation in Uttar Pradesh Power Corporation Ltd v. NTPC Ltd and
others)

4. Conclusion

The principle of profit maximisation holds the key for private investors even when they partner with
public entities. Disputes mean delay and delay in turn would mean escalation of costs; and for a private
investor it would mean loss of earnings from the resources which he could have utilised otherwise.
Efficacy of dispute resolution mechanism thus holds significance, in attracting private investors to part-
ner with the government. As the above discussion shows resolving disputes through amicable means like
mutual discussions, conciliation, or mediation, at the earliest, holds the best solution in any PPP initia-
tive. However, it is not so often that parties agree to merge their difference by mutual concessions and
adjustments. When the parties fail to come to an agreement Arbitration is resorted which has many
advantages including flexibility in procedures, binding nature of the award, the relative speed in which

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30 Harisankar K.S. and Sreeparvathy G.

matter is resolved etc. However, as discussed above the way in which arbitration is practiced in the country
has made it no better than litigation. Judicial intervention, delay and procedural rigidity of the tribunal have
diminished its scope as the most effective mechanism in PPPs.
Adjudication by statutory expert bodies like the Electricity Appellate Tribunal seems to be a viable
model for dispute resolution in PPP. There are many advantages like expertise, efficiency in time, less
interference by the judiciary, etc., which can be effectively used for structuring a dispute resolution
mechanism. A harmonised system of dispute resolution with a single appellate authority at the centre
would be a workable model for PPP in India in most of the sectors. Barring the jurisdiction of the civil
courts and making provision for appeal only to the apex court in substantial questions of law would go a
long way towards speedy disposal; while the presence of experts from diverse fields would ensure effi-
cacy in such an arrangement. It may be hoped that the Government of India will make suitable changes
in the Draft PPP rules of 2011 taking in to account the demand for a detailed framework for dispute
resolution.29

Notes
  1. The Union Government has estimated investments worth $320 billion in the infrastructure sector in the XIth
plan. Further investment of $1 trillion in infrastructure is estimated in the XIIth plan. See Raju (2011: 105). The
Economic Survey of India 2008 had estimated that over the next five years, the investment needs in physical
infrastructure will be at US$500 billion, wherein the share of the private sector is projected at US$150.4 billion
(30.07 per cent).
  2. According to Dr Rangarajan, other main challenges include inflation, raising agricultural productivity, raising
social structure spending and fiscal consolidation.
  3. The government of India now allows100 per cent FDI (under the automatic route) in all infrastructure sec-
tors including roads, power, ports and airport sectors. The percentage of FDI in other sectors allowed are as
follows—74 per cent in telecom services and 100 per cent in telephone equipment; 49 per cent to100 per cent
for various services in the aviation sector. See Government of India (2011: Para. 11.143, p. 286).
  4. According to one estimate, foreign investment amounts to only 7 per cent of the total PPP in terms of number of
projects and merely 1 per cent in terms of the value of projects. See Government of India, The Indian Economic
Survey, 2009–10 (Chap. 10).
  5. For statistics on FDI, see http://www.unctad.org/en/docs/webdiaeia20111_en.pdf
  6. Second Report of the Committee under the chairmanship of Shri B.K Chaturvedi available at http://planning-
commission.nic.in/reports/genrep/rep_nhdp_2.pdf. Also, see Ganesh (2011).
  7. The National PPP policy 2011 (available at http://www.pppinindia.com/Defining-PPP.php) defines Public–Private
Partnership as ‘an arrangement between a government/statutory entity/government owned entity on one side and
a private sector entity on the other, for the provision of public assets and/or public services, through investments
being made and/or management being undertaken by the private sector entity, for a specified period of time, where
there is a well defined allocation of risk between the private sector and the public entity and the private entity
receives performance linked payments that conform (or are benchmarked) to specified and pre-determined per-
formance standards, measurable by the public entity or its representative.’ According to the draft an entity that has
a majority non-governmental ownership (51 per cent) or more is construed as a private entity. ‘Public Services’
are those services that the State is obligated to provide to its citizens or where the State has traditionally provided
the services to its citizens. A ‘Public Asset’ is that asset the use of which is inextricably linked to the delivery of a
Public Service, or, those assets that utilize or integrate sovereign assets to deliver Public Services.

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  8. Anant and Singh (2009), in their working paper, maintain that rich states and states with fewer law and order
issues have been more successful in attracting private investors through the PPP model.
  9. Mahalingam (2008), in his paper ‘PPP Experiences in Indian states: Bottlenecks, Enablers and Key Issues’
observes: ‘governments or coalitions in several states such as Tamil Nadu, Kerala and West Bengal that have
representations from left-wing factions are often strongly opposed to the entry of the private sector to provide
essential services’.
10. The twin goals of social and economic justice, fundamental rights, directive principles of state policy, right to
property, centre state relations and separation of powers becomes relevant at various stages of the working of
PPP model of development. For details, see Kapur (Contracts in Public–Private Partnerships).
11. For details, see Kapur (2008).
12. For instance, Special Purpose Vehicles (SPVs) may be created which will allow private sector to participate in
terms of leveraging finances (through bonds) or Specific Operation and Maintenance (O&M) activities may be
contracted out.
13. As identified by the PPP tool kit of the Ministry of Finance, Government of India.
14. Questions of illegality relate to whether the decision-making authority exceeded its powers, committed an error
of law, committed a breach of the principles of natural justice, acted against the principles of reasonableness and
abused its powers. See Balco Employees’ Union v. Union of India and others (2002) 2 SCC 333 and Centre for
Public Interest Litigation and Anr. v. UoI and others (2000) 8 SCC 606.
15. S.N. Joshi & Sons Ltd v. Nair Coal Services Ltd and others (2006) 11 SCC 548.
16. See Karnataka Infrastructure Policy, 2007, Orissa Public Private Partnership Policy, 2007, etc.
17. For instance, most of the concession contracts of NHAI contain provision for mediation by consultant or inde-
pendent engineer at the first stage and by a Dispute Resolution/Review Board at the second stage. Only when
the parties refuse to accept the recommendations of the DRB, an arbitration procedure as per the contract is
commenced.
18. Federation Internationale Des Ingenieurs-Conseils is an organisation of consulting engineers. The FIDIC is well
known in the construction engineering industry for its work in defining Conditions of Contract for the Construc-
tion Industry worldwide.
19. The NHAI had substantially diluted the FIDIC conditions under Conditions of Particular Applications
(COPA).
20. The report, on page 12, reads ‘Scope of Independent Engineer: FIDIC places great reliance on the Engineer both
in terms of supervision and first level adjudication of disputes. This role of the Engineer is being internationally
accepted and there is no reason not to adopt a similar role for the Engineer in India.’
21. Most of the dispute resolution mechanisms contemplated prior to the stage of arbitration have only recommen-
datory powers. See DRB provisions under NHAI Model Concession Agreements.
22. Exception 1 to Section 28 reads ‘this section shall not render illegal a contract, by which two or more persons
agree that any dispute which may arise between them in respect of any subject or class of subjects shall be re-
ferred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the
dispute so referred.’
23. Case study as seen in GoI (2008: 156).
24. For a perspective of the foreign investor, see Bettauer (2010).
25. Section 77(1) of the Electricity Act, 2003.
26. See Section 79 of the Electricity Act for the functions of the Commission.
27. Section 64(3) and 111(5) of the Electricity Act. Also see Sec. 14 A (6) of the Telecom Regulatory Authority Act,
1997.
28. The appellate Tribunal for electricity is said to have decided approximately 570 cases (appeals, petitions, review
petition) in 19 months, virtually all within stipulated timeframe, since its constitution in 2005. Case study as
seen in Criticality of legal issues & contracts for public–private partnerships (Government of India: 156).

Journal of Infrastructure Development, 5, 1 (2013): 21–32

32 Harisankar K.S. and Sreeparvathy G.

29. The state of Orissa has demanded the inclusion of a framework for alternative dispute resolution and arbitration
in the draft PPP rules promulgated by the Government of India (Business Standard 2012).

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