Does litigation decelerate the city growth course of? – SPECIAL – GENERAL

The rapid urbanization of the country increases the need for adequate infrastructure to support the massive growth of our cities. The center and state governments have recognized the need for proper infrastructure, which plays a dual role in not only providing services to citizens but also serving as a source of employment for many. The same is reflected in the budget documents of recent years. However, we often find that some of the projects are mentioned repeatedly even after their expected completion date. Such cases indicate the need to investigate. The delay in the completion of the public infrastructure projects has also become a serious point of discussion due to the enormous cost overruns to be borne by the state treasury. Litigation plays an important role in such delays.

According to the 2017-18 Economic Survey Report, a review of projects that had suffered massive delays due to litigation in six ministries cost the treasury more than Rs. 52,000 crores. The following table gives an idea of ​​the size of the litigation that various central government departments are involved in. As private actors in this sector are expected to invest more and more, removing such barriers would ease the business climate in the country. All of this underscores the need to analyze the causes and causes of litigation as a matter of priority so that current and upcoming projects can be dealt with effectively.

Table 1 Cases pending among the ministries as of 2017

Source: Ministry of Justice document from June 2017

Grounds for litigation

Litigation in public infrastructure projects can arise from disputes with public sector companies (PSUs), private entities (contractors, funding agencies, project management consultants, etc.) between government departments and the public, to name a few. The reasons for such disputes are mainly (but not limited to):

• Land-related problems (land acquisition, remediation and delay in the availability of land)
• Absence / delay of regulatory approvals (delay in obtaining approvals from multiple departments / agencies)
• Inadequate project preparation (projects that were otherwise feasible became unprofitable during execution; changes to plans, estimates, etc. after the projects were awarded to private actors, inadequate contractual terms)
• Failure to comply with the contract due to:
  • Uncertainties during implementation (based on on-site situations)
  • Bad quality of execution
• Public objections to the project
• Process delays (e.g. delay in completion of contracts / loan agreements, timely payments)

From the above points it can be understood that these are merely “symptoms” and not the “root causes” of the problem. Increasing the capacity and efficiency of the legal system can alleviate symptoms for a while, but may not guarantee a sustainable solution.

Need for systemic change

The above reasons indicate serious shortcomings in our existing institutional framework. The basic challenges could be limited to the following:

• Lack of coordination and personal responsibility between several departments
• Availability of funds
  • Lack of funds available to the government for large transactions such as land purchases
  • Need to improve the financial performance of investors
• Lack of technical skills and capacity within government departments to conduct thorough preliminary studies (e.g. feasibility studies, environmental impact assessments, social impact assessments, transport impact assessments), produce detailed comprehensive documents / reports and ensure quality audits
• Lack of transparency and involvement of the public (opinion) in the projects

Addressing these “root causes” could minimize the delays and disputes that pave the way for litigation. Digital interventions and e-governance initiatives should enable better coordination between agencies. An overarching body under the direction of the highest government authorities, which regularly overlooks the progress of the projects, can also be an answer to the coordination problem. Land remains a major issue not only among investors and landowners, but also within the institutional structure of government. The constant dispute between the finance department and the other departments involved in the land / project such as PWD, railways, NHAI, local governments etc. leads directly to the need to have transparent real estate records / databases and a central source (like a ‘land bank’), to provide information about the availability of land and property. The introduction of innovative policy instruments such as Transferable Development Rights (TDR) could potentially address land-related issues, provided these guidelines are carefully crafted by thoroughly understanding the context. There is also a serious need to improve the financial capacity of private investors through the revival of PPP (Public Private Partnership) modes. This could be achieved by researching innovative PPP models such as Hybrid Annuity Models (HAM).

The technical skills and capacities of our government departments and agencies should be improved. The existing employees are overloaded with work; and they may not have “newer” knowledge / skills to take on challenges that differ from traditional challenges. A previous study by us found that our local governments do not have qualified professionals such as project management specialists, procurement specialists, city planners, transportation planners, environmental engineers, etc. on their staff. The cause could be traced back to “old” service rules. Last but not least, public trust in trust by ensuring transparency (by making all documents and reports publicly available) in this process is sure to produce positive results. Public consultations and hearings should not be limited to mere procedural formalities, but should be viewed as a platform for deliberation.

Way forward

Only with an effective change in the institutional system could we address the root causes of delays and disputes that continue to culminate in litigation. Alternative Dispute Settlement Mechanisms (ADR) Mechanisms such as arbitration, mediation, negotiation and arbitration should be explored in order to expedite disputes and avoid litigation. A sector-specific court-like body such as a state-level tribunal (such as NGT, ITAT, etc.) that deals exclusively with infrastructure-related disputes could also be an effective solution to speed up litigation delays. provided that these bodies are adequately represented by experts. Such an “infrastructure tribunal” could also use various ADR mechanisms to further accelerate the settlement process. Tight regulation of the system and a slow dispute settlement process in the country limit the participation of private actors in the infrastructure sector and keep foreign investment in check. In the end, when an infrastructure project is facing litigation, taxpayers’ money is at stake with no productive outcome.

(Praseeda Mukundan is Senior Research Associate at the Center for Public Policy Research in Kochi. She is an architect and urban and regional planner at the School of Planning and Architecture in Bhopal. Her areas of interest are spatial planning, transport planning and economic development and sustainability in architecture.