Prime Minister Manmohan Singh has asked the Planning Commission to prepare a draft bill to put in place a mechanism for speedy resolution of issues related to public contracts. The bill, it is hoped, will be able to respond to rising concern over delays and cost-overrun in public-private partnership projects because of disputes.
“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”, the PMO said in a 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.
“Most concession agreements 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”, it said.
Moreover, the private sector entities often find it difficult to enforce their contractual rights and tend to stop short of claiming damages otherwise due to them, for fear of antagonising project authorities, the statement added.
Given the current state of arbitration in India and the likelihood of arbitral awards being challenged in courts, project developers face a long and arduous process, compounding the burden on them.