Balancing risks and rewards in Indian water

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For the Indian government’s new focus on service delivery to work, it will need to re-assess the allocation of risk within existing contract structures.

The general principle that responsibilities – and therefore risks – are best allocated to the party most able to manage that risk, is not always followed in the Indian water sector, according to Manish Sharma, managing director of urban infrastructure services provider JUSCO (Jamshedpur Utilities and Services Company).

 
Sharma told GWI that ULBs are reluctant to accept that financial penalties imposed on the private party for failure to achieve specified performance levels should be matched with financial rewards for exceeding these levels.
 
According to Sharma, contracts under which the private provides financing are less attractive to companies than management contracts which incorporate a fixed fee plus payments for meeting key performance indicators.
 
Contracts that have a long duration (including five-year management contracts) need to have built-in flexibility so that contract provisions can be adjusted to take account of changing circumstances, he argues.
 
The key to whether the great expectations at the central government level will actually be realised in ULBs may ultimately be whether these sorts of comments are taken on board in future by those preparing contract documentation.