Pvt project developers to get special treatment

KATHMANDU:

Private project developers may soon get special treatment from the government for construction of various physical infrastructure of strategic importance if the new Public Private Partnership (PPP) Policy is endorsed by the Cabinet.

The draft policy, which will be circulated for discussion among various government agencies and the private sector next week, includes a provision on ‘unsolicited proposal’, under which a developer can directly approach the government for development of roads, bridges, airports, dry ports, hydropower plants, transmission lines, drinking water and waste management projects, and infrastructure related to education, health, tourism and information and communication.

If such projects are deemed of strategic importance to the country or require construction equipment that can solely be provided by the private sector, the concerned government agency can initiate the bidding process based on feasibility study report submitted by the developer.

The bidding competition should be open to all, including the developer that first proposed to build the project, says the draft policy.

During this process, the developer that first expressed interest to build the project may be disqualified because of better terms and conditions presented by another contender.

But even if that happens, the government agency should first approach the developer that initially proposed to build the project and ask if it is willing to work as per terms and conditions laid by the short-listed firm, says the draft policy. “If the developer agrees, the contract could be handed over within next 30 days.”

Also, physical infrastructure projects worth over Rs 100 million can be handed over to a developer upon getting approval from the Cabinet. In other words, the developer need not go through bidding process to bag the project. However, bidding process is a must for other projects that the government intends to build under PPP modality.

The government has long been trying to introduce the PPP Policy to engage the private sector in the nation building process. This way, the government does not need to necessarily mobilise its own financial resources and expertise to meet every infrastructure need of the country.

This concept is also popular in many developed and developing countries, where the government only plays the role of the facilitator, while the private sector raises funds to build projects like roads, bridges, hydropower plants and transmission lines.

Once completed, these projects are used by the developers for certain years, during which they recoup investment and generate some profit. The projects are then handed over to the government free of cost and in a good working condition.

To facilitate the private sector in this front, the government will acquire adequate land required to develop projects under the PPP modality.

“The government will not sign the concession agreement (also known as Project Development Agreement) unless 80 per cent of the land required for the project has been acquired,” says the draft policy. “The developer will later have to recompense the government, fully or partially, based on the nature of the project.”

Also, the government intends to share risks and benefits proportionately with the private developer during and after the construction phase.

Generally, risks emanating from design, management, quality, non-compliance of environment protection rules and lack of technical knowhow and expertise should be borne by the project developer, says the draft policy.

But risks that stem from political condition, lack of coordination between government agencies, lethargic land acquisition process and delay in extension of required licences or permissions and funds promised by the state should be borne by the concerned government agency. Also, the responsibility of servicing the debt will rest on the shoulder of the concerned state agency, if the government cancels the project mid-way, adds the draft policy.

Any dispute would be resolved by referring to the Model Law on International Commercial Arbitration prepared by the United Nations Commission on International Trade Law or existing domestic laws on dispute settlement, adds the draft policy, which will be tabled at the Cabinet upon completion of the consultation round with various stakeholders, including various umbrella bodies of the private sector.

Major points

• Draft policy includes provision on ‘unsolicited proposal’

• Concerned govt agency can initiate bidding process based on feasibility study report submitted by developer that has shown interest in developing the project

• Physical infrastructure projects worth over Rs 100m can be handed over to a developer upon getting approval from Cabinet

• PDA to be signed only after 80pc of land required for the project has been acquired

• Govt intends to share risks and benefits proportionately with private developer during and after construction phase

• Disputes to be resolved by referring to UN Model Law on International Commercial Arbitration 

Source: THT