I read a very interesting article this morning in the Hindu Business line on States going back on power contracts that they signed with private power providers.
We will talk about this a lot more when we get into PPPs, particularly when we discuss the Dabhol example. However it might be interesting for all of you to see the political dimensions of the infrastructure problem. The article says that the new Meghalaya government cancelled a contract entered into by the old government on the grounds that it was a "violation of the states policy"! The moral of the story is that you might have demand (a need for, or a lack of power), and you might have supply (private power providers), but other social/political/legal/environmental issues can easily scuttle the project!
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6 comments:
In my view this is an effect of excessive decentralization of the power. International deals cannot be violated as there is a powerful central authority to question.A clear demarcation of powers between central and state governments is needed. May be on monetary basis. More than X amount central govt. and so. OR may be from other side, the companies who are planning to invest in infrastructure should form a union, to question such things, or put forward a legal action.In the present scenario,when one company questions and gets rejected there will be another company to take up the project BUT when they all boycott the project as a union the govt will have to reconsider such decisions.
This cancellation of contract might be due to corruption. Govt now can award this project to some other company which politicians favor.
"violation of the states policy"! might be a reason the Govt to cancel the contract.This might generally happen in case of small projects which gets highlighted when same thing is done for large scale projects.
"violation of state policy" happens always when a state govt. changes as their policies too change.Violation of state policy cannot be violation of law which can be termed as corruption. Why should a company bear a loss due to change in the state policy which they have no clue about in their MOU.
Just wait till we discuss the Dabhol case study - several such issues will be analyzed!
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