Design and structure vital for success of PPP projects

By Hemant Sahai and Soumya Kanti De Mallik, HSA Advocates
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The Ministry of Urban Development’s Smart City Mission contemplates significant use of public-private partnership (PPP) structures for financing, developing and operating the smart city projects. In addition to the private capital needed to finance the mission, PPP structures will leverage efficiencies and technology of the private sector. However, to attract private investment, PPP projects will need to be appropriately designed and structured to ensure viability and appropriate allocation of risks and, most importantly, to treat the private investor as an equal partner.

Some key elements required to design an efficient PPP structure are analysed below.

Hemant Sahai is the managing partner and Soumya Kanti De Mallik is an associate partner at HSA Advocates. HSA is a full-service firm with offices in New Delhi, Mumbai and Kolkata, and with a correspondent relationship in Bangalore.
Hemant Sahai is the managing partner and Soumya Kanti De Mallik is an associate partner at HSA Advocates. HSA is a full-service firm with offices in New Delhi, Mumbai and Kolkata, and with a correspondent relationship in Bangalore.

Greater cooperation: A PPP project is a partnership between the public authority and the private entity to promote a project, while sharing the risks, costs and resources. A major reason for the failure of such partnerships is the failure of authorities to recognize the long-term risks undertaken by the private sector, leading to disputes.

In this context, the Kelkar Committee in its recent report commented that the success of deploying PPP projects will depend on whether public authorities can change their attitude and mind-set, and accept that uncertainties and appropriate adjustments are inherent in implementing long-term contracts. This change in mind-set needs to be reflected in the design of the project agreements.

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