Provision for exit makes projects more competitive: A Didar Singh

Interview with Secretary-General, Ficci

With the economy yet to emerge from the slowdown, private companies are finding it difficult to carry on with projects bagged from the government. Contractual constraints and lack of precedence have left the government, as well as companies, struggling. A Didar Singh, secretary-general of the Federation of Indian Chambers of Commerce and Industry, director-general of the Indian Council of Arbitration and former member of the National Highways Authority of India, says formal provisioning of an exit clause in contracts could help. Edited excerpts:

Do existing contracts to the private sector in road construction, petroleum or infrastructure sectors have exit routes?

Most contracts do have such provisions. In fact, public-private partnership (PPP) contracting in India is one of the most mature and developed.

What changes should be brought about to contracts?

The issue is not of changing contracting, but ensuring all government approvals relating to issues are made time-bound and there are 'conditions precedent' for PPP contracting.

Does allowing companies to sell projects after they create value for themselves make a project more attractive to private players?

Yes, it does. Prior provisioning for exits provides a more competitive environment.

What safeguards can be built to ensure an exit is allowed without harming the interests of the lenders or the project?

The real safeguard is formal provisioning in the contracts. It is important to ensure it matches with the completion clause in contracts. Besides, any other conditionality is provided for in advance.