The User Guide for Contingent Liability of PPP Projects has been designed to assist Project Sponsoring Agencies (PSAs), Transaction Advisers (TAs), Project Appraising Authority and Concessionaire in assessing the amount of financial liability arising from a PPP project. It is also expected to aid PSAs in making informed decisions regarding the financial payout to Concessionaire as a result of occurrence of unforeseen events.

This User Guide provides an introduction to Contingent Liabilities in PPP projects, Principles of Contingent Liability, Key Objectives, Applicability and Estimation Methodology. It also gives an overview of the contents in the Contingent Liability Toolkit, explains how to use the Toolkit and briefly introduces the tools of the Toolkit.

Key Objectives

The objective of the User Guide is to provide guidance to the PSAs, TAs, Concessionaire/Project Development and Implementing Agencies on the following:

• Understanding the concept of contingent liabilities that may arise from PPP projects;
• Measure and disclose the contingent liabilities arising from PPPs so that the project authorities and central/state government can better manage the fiscal costs arising from these long-term agreements and strengthen fiscal discipline to ensure macro sustainability;
• Ensure prudential limits on contingent liability;
• Understand potential financial risk arising from a PPP project & better manage contingent liabilities.

Applicability

This User Guide will be useful for PSAs, TAs, Concessionaire/Project Development, and Implementing Agencies for the following:

• To assess the contingent liability arising from a PPP project;
• Appropriate funds at the beginning itself to meet contingent liabilities;
• Allocation of risks arising from PPPs;
• Taking mitigation measures to minimize the impact of adverse events.