A concession gives a private partner (referred to as the concessionaire in this format of a PPP arrangement) a bundle of rights such as developmental rights, operating rights, rights to collect user charges, etc. in return for certain specified obligations to be undertaken, including responsibility for operations and maintenance. The Concession Agreement is designed to identify the rights and obligations of the parties, the contracting Authority and the concessionaire. The concession arrangement is generally for a longer period of time typically ranging between 5-60 years. Under this arrangement, the ownership of the project asset remains with the Authority, while the constructive possession is passed on to the concessionaire. At the end of the agreement period, all the project assets, including the assets purchased by the concessionaire for the purpose of the project, revert to the public entity.
In a concession, the commercially viability of a project determines whether the payment is to be made by the private partner to the public partner (in form of revenue share/ concession payment) or vice versa (in the form of grant/ annuity payment).
A good understanding of the key dates that appear in the concession agreement is necessary among practitioners. Key dates set out in a concession agreement and their definitions as set out in the MCA for development of National Highways under PPP framework, are as follows;
a. Appointed Date - 'Appointed Date' means the date on which Financial Close is achieved or an earlier date that the Parties may by mutual consent determine, and shall be deemed to be the date of commencement of the Concession Period; For the avoidance of doubt, every Condition Precedent shall have been satisfied or waived prior to the Appointed Date and in the event all Conditions Precedent are not satisfied or waived, as the case may be, the Appointed Date shall be deemed to occur only when each and every Condition Precedent is either satisfied or waived, as the case may be.
b. Project Completion Date - 'Project Completion Date' means the date on which the Completion Certificate or the Provisional Certificate, as the case may be, is issued under the provisions of Article 14.
c. Commercial Operations Date (COD) - "COD" shall have meaning set forth in Clause 15.1. Clause 15.1 reads as follows:
"[Two-Laning shall be deemed to be complete when the Completion Certificate or the Provisional Certificate, as the case may be, is issued under the provisions of Article 14, and accordingly the commercial operation date of the project shall be the date on which such Completion Certificate or the Provisional Certificate is issued] (the "COD"). The project Highway shall enter into commercial service on COD whereupon the Concessionaire shall be entitled to demand and collect Fee in accordance with the provisions of Article 27."
d. Transfer Date - "Transfer Date" means the date on which this Agreement and the Concession hereunder expires pursuant to the provisions of this Agreement or is terminated by a Termination Notice.