Prime Minister Manmohan Singh today asked Planning Commission to prepare a draft bill to put in place a mechanism for speedy resolution of disputes relating to public contracts or PPP projects.
"It is in the interests of all concerned to set up an institutional mechanism that can provide assurance of speedy resolution of disputes, especially in respect of large public contracts", said an official statement.
The Planning Commission, it said, will prepare the draft Bill on Dispute Resolution in public contracts in consultation with all stakeholders and ministries.
The dispute resolution in large public contracts is an area of growing concern and the Prime Minister has initiated the first steps in improving the institutional arrangement for dispute settlement, it said.
The step assumes significance in view of the rapid expansion of Public Private Partnerships (PPP) have already attracted investment of a few lakh crore of rupees in different sectors.
Most concession agreements, it added, "specify the obligations of project authorities along with timelines for fulfilling such obligations. Whenever some of these obligations are not fulfilled, projects get delayed, which in turn increases project costs and reduces the returns."
Moreover, the private sector entities often find it difficult to enforce their contractual rights and tend to stop short of claiming damages due to them for fear of antagonising project authorities, it said.
Given the current state of arbitration in India and the likelihood of arbitral awards being challenged in courts, project developers face a long process which imposes a heavy burden on them.
Large amounts of capital get locked up in disputes, restricting growth and the ability of entrepreneurs to use it fruitfully. Often developers factor these delays into their costs, thus pushing up project costs.
