This article is written by Vasundhara Saxena Who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.
Table of Contents
Introduction
PPP stands for a Public-Private Partnership, but what do they really mean? Monuments, highways, and public parks require constant maintenance and reparations. This creates extra financial responsibility for the government, which it reduces with the help of private parties through such arrangements.
Such arrangements are used in multiple sectors – energy, roadways, monument maintenance, construction of malls, dams to name a few. Private parties often help construct and maintain, and then draw a share of the revenue generated for recovery of the cost they bore. These projects are usually long term in nature. They could be for a period of 5 to 10 years or more, depending on the nature of the PPP model being followed and the size of the project.
The PPP concession discussed in this article is about the Humayun Tomb and Sundar Nagar nursery, which was undertaken by the Aga Khan Cultural Trust Fund. Such PPP agreements divide responsibilities of maintenance, construction, reparations, improvements etc. between the parties and it could be both for-profit or not for profit motives.
This particular PPP arrangement was not for profit and had been undertaken by Prince Shāh Karim al-Husayni, known by the religious title Mawlana Hazar Imam within Ismaili Shia circles and as Aga Khan IV elsewhere, who undertook this project for the protection of culture and heritage.
About the Humayun tomb restoration project
Led by the Aga Khan Foundation and the Aga Khan Cultural Trust Fund, with the support of the Tata Trust Fund, the Humayun Tombstone Nursery Restoration Project aims to restore and restore historical buildings and public spaces to promote development, economic and cultural development.
Humayun’s widow, Hamida Banu Begum, initiated this construction in 1569, fourteen years after his death. It is the main unique example of a proper Mughal style inspired by Persian architecture. It was listed as a World Heritage Site in 1993. Prior to the restoration work, serious conditions of destruction and illegal occupation were rampant. Dirty stalls such as bazaars were set up and heavy vehicles were allowed to park illegally in these open spaces. In Nila Gumbad, thousands of “slum dwellers” were retained as “tied voters” during the election period.
Dargah’s environment in Hazrat Nizamuddin Auliya was also mercilessly destroyed, causing the holy jar to turn into a messy cesspool. The Aga Khan Cultural Trust (AKTC) cooperated with the Archaeological Survey of India (ASI) to begin restoration work around 1999 after research started in 1997 and was completed in March 2003. Most development projects were undertaken thereafter and they included the following developments:
- Approximately 12 hectares of lawns were replanted and more than 2,500 trees and plants were planted in the garden, including mango, lemon, neem, hibiscus and jasmine branches.
- Replacement of water circulation systems for sidewalks has also been installed. This allows water to flow through the garden waterways and idle fountains can start working again.
- The rainwater harvesting system was approved and the old wells discovered during the restoration works were desalinated and activated.
- Stalls and other intrusions were demolished, restoring monuments and green spaces. The graceful gardens now surround the monuments, adding to their dignity and wonder. When lit up in the dark, this monument looks truly spectacular.
- Manual work uses hand tools to place a thick layer of cementitious concrete away from the ceiling, exerting approximately 1.102 tons of pressure on the structure, and the accumulated thickness is approximately 40 cm. It has now been replaced by the typical lime-based roofing layer.
- The initiative has significantly expanded the scope of the conservation project, incorporating Humayun’s Tomb, Nizamuddin Dargah, Sandal Nursery, some 30 monuments and a complete landscape plan in the creation of urban parks.
- The project has also significantly improved the quality of life for residents around Hazrat Nizamuddin Basti. The master craftsman dedicated approximately 200,000 working days to the project. The main design for the restoration of Humayun’s tomb as a Mughal builder requires the removal of 1,000,000 kg of concrete and thousands of square meters of cement. The residential communities of Hazrat Nizamuddin Basti are now taking advantage of improved urban infrastructure in sanitation, education, water supply and sanitation.
- The construction of an alternative tunnel by the Delhi government in 2006/2007 to connect East Delhi and Nehru Stadium, widening the road near the mausoleum for the 2010 Commonwealth Games and connecting National Highway 24 and Lodi Expressway posed a huge threat. Eventually, the Monument was blocked by the Bureau of Archaeological Survey of India.
- Installation of a visitor interpretation centre and museum in the complex is also in progress.
International frameworks on PPP arrangements
PPP laws can also be used to close gaps within the laws of various different countries and uniformising the creation of such contracts to a certain extent, like enabling the grant of step-in rights to lenders and requiring open and fair procurement processes.
These modifications could even be embodied in sector-specific law, or within the case of procurement, a sale or competition law, or are often included during a general concession or PPP law.
While guidance and examples are often useful, each PPP/ concession law needs careful drafting to be consistent with the host country’s existing laws.
UNCITRAL guidance on PPP/ concession laws
The United Nations Commission on International Trade Law (UNCITRAL) published a Legislative guide Privately Funded Infrastructure Projects (2000). This guide was made to provide a framework for reference to non-public investment in public infrastructure. It provides for a balance between the private and government contribution depending on the nature of the project. The Guide sets out suggested legislative language in its Model Legislative Provisions on Privately Financed Infrastructure Projects of 2003.
EBRD core principles for up to date concession law
The European Bank for Reconstruction and Development (EBRD) created a set of core principles for up to date concession law as legislative guidelines in various languages. The Legal Transition Group of the EBRD prepared a working paper called the EBRD Core Principles for justification of the aforementioned core principles.
OECD principles for public governance of public-private partnerships
The OECD Principles for Public Governance of Public-Private Partnerships provide concrete guidance to policymakers on Public-Private Partnerships (PPP) and help achieve a profitable relationship for both parties.
Framework for Public-Private Partnerships in India
Because the Constitution of India has well-divided sectors into Union and State List, the administration and execution of such partnerships are done by the government which has the authority to control that particular sector respectively.
For example, national highways, power projects will come under the Union list and hence the Central government will be responsible for such partnerships.
There are several guidelines introduced by the Central government which have to be adhered to uniformly, like the Guideline for audit of Public-Private Partnership Projects, 2009 released by the Comptroller and Auditor General of India, Guidelines for Establishing Joint Venture Companies in Infrastructure Sectors by the Secretariat for the Committee on Infrastructure of the Planning Commission, Guidelines for Monitoring of PPP Projects given by the Planning Commission, Guidelines for Formulation, Appraisal and Approval of Public-Private Partnership Projects, Guidelines for Invitation of Financial Bids for Public-Private Partnership Projects and the Guidelines for Pre-qualification of Bidders for Public-Private Partnership Projects by the Ministry of Finance to name a few.
At the State level, some key states of India like Gujarat, Punjab, Karnataka, and Andhra Pradesh have developed legal frameworks for private participation in infrastructure. The Public Procurement Bill, 2012 didn’t come to fruition and such arrangements are majorly being guided either by Standardized principles provided by the World Bank or by policies created by depending upon the sectoral conditions of the respective countries.
Types of PPP arrangements
There are several kinds of arrangements which are listed below-
- In a Build – Operate – Transfer (BOT) model, which is typically used to develop a discreet asset rather than a whole network, like a road, it is a rather easy structure that provides maximum freedom for the private sector partner during construction and thus, the general public sector bears the equity risk.
- In Build – Own – Operate (BOO): The facility isn’t transferred to the overall public sector partner. A BOO transaction may qualify for tax exemption status and is typically used for water treatment or power plants.
- In Build – Own – Operate – Transfer (BOOT) The private sector builds and owns the facility for the duration of the contract, with the primary goal of recouping the construction costs (and more) during the operational phase. This model is typically used for school and hospital contracts.
- Other models Design-Build, (where the contract is awarded to a private partner to both design and build a facility or a touch of infrastructure that delivers the performance specification within the PPP contract) Design – Build – Finance, or Design – Build – Finance – Operate (DBFO).
- Design-Build – Finance – Maintain (DBFM), Design-Build – Finance – Maintain – Operate (DBMFO) also exist, where the burden shifts upon the government or the private entity depending on the terms of the agreement.
- There is also O & M (Operation & Maintenance) which is generally used for monuments.
In an O&M contract, a private operator operates and maintains the asset for the overall public partner, usually to an agreed level with specified obligations.
Role of the PPP agreement
The agreement should determine which tasks belong to which party and ensure that the division of duties has been made properly. The agreement contains the specified details of concessions, ownership details, the dispute resolution mechanisms, etc. . The structure of this Agreement decides long-term partners.
Concession
Division of funds and such specifications with other relevant points are specified in this section. It handles the approval of activities granted to concessions or project companies. Details like rights, privileges and obligations of the private company; and concessions/contract period are all definitely specified in the agreement itself This may be the determination of the period or fund division, which is by ticket sales in the case of a monument, for example. This depends on the nature of the selected parties.
Project site related specifications
Rights, title and use of the project site, handover of the project area, ownership of the situation, maintaining the situation and permission of private companies must be picked up from the relevant authorities. This is the current case is Nila Gumbad, Sundar Nagar, Humayun Tomb and a few other areas.
General obligations of the private entity
The obligations of the private entity would be defined in the agreement and could entail a variety of functions and specifications of the scope of their work, division of the project area, their administrational duties, financial contributions, performance securities and any other obligations relating to maintenance, construction etc.
Construction, Maintenance and Design
In this section of the agreement, terms may include design and manufacture of drawings, approval and structure of architecture and techniques, the design and drawing, project building, start and completion, the consequences of early and late completion, monitoring and monitoring of construction, examination, operation, maintenance and closure temporarily repairing and maintaining, management of networking, connection networks and access to the plant of other operators/agencies, violation of operating and maintenance contracts, implementation measures and implementation measures (quality and Number of project outputs), power monitoring, information opening, underperformance, insurance, operating time, etc.
Obligations of the government agencies
It provides the general obligations and specific obligations of the Contract Agency. For example, you can include the incentives of state incentives that offer project locations and other areas where the project/project company can expect from the government. These can be specified in this section of the agreement.
Force Majeure clause
To withstand any event due to political factors or non-political factors, obligations of the parties, costs and compensation or due to the Act of God, or to predict the fate of the concession due to such unforeseen circumstances certain terms are specified in this part of the agreement. This term is extremely important in commercial contracts, as it is also able to minimize unforeseen damages that may arise.
Termination clause
Termination of contracts specifies events under which it may come to an end, what would constitute a breach and what would lead to termination are separately defined.
Applicable laws
Laws for applying and resolving applicable legal disputes, dispute resolution methods are used (mediation, arbitrator, etc.) as well as procedures, obligations and rights of parties in this part of the agreement.
Representatives and warranties clause
This clause tends to specify who can represent, authorization to powers, disclaimer, warranties, and any other disclaimers that are necessary to specify in the agreement.
Conclusion
The agreement during a PPP decides the long run of the partnership and is what clearly demarcates the responsibilities of each party. The agreement is the backbone of the arrangement and needs to possess a clear listing of all obligations of each party that may make the partnership successful. Which type of arrangement that has been made can be deduced from the division of funds, responsibilities, area, time period for the concession, administration of the restoration in this case.
The PPP of the Humayun tomb project was a not for profit partnership where the ownership of the public lands remained with the government and the duration was 10 years. It was a standard concession undertaken by the Aga Khan Trust for cultural and spiritual reasons rather than a profit-driven partnership.
Reference
LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:
https://t.me/joinchat/J_0YrBa4IBSHdpuTfQO_sA
Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.
