What Is Model Concession Agreement

October 15, 2021

Concession contracts are fundamental for infrastructure development in the country. The EIB has proved to be very useful in simplifying concession agreements. It has reduced the time and cost of implementing these agreements. However, the excessive rigidity of THE BEA`s structure harms the interests of private companies and discourages them from investing in the infrastructure sector. Efforts should be made to address concerns about misallocation of risks and to allow for the renegotiation of concession agreements in accordance with the recommendations of the Kelkar Committee report. Example 6: Peru – Contrato de Concesión de los Ferrocarriles del Sur y Sur Oriente (Spanish) – Concession contract between the Peruvian State and a private entity (Ferrocaril Transandino S.A.) which carries out the concession of the southern (Matarani/Mollendo to Cusco) and south-east (Cusco to Machu Pichu) railway lines. The duration of the concession is 30 years (renewable). The concessionary authority shall confer on it the right to use fixed assets and rolling stock for the carriage of passengers and goods. The main tasks of the concessionaire include the modernisation and maintenance of railway infrastructure (including signalling and telecommunications systems), the repair of rolling stock and the improvement of operational performance. The concessionaire shall be obliged to grant open access to other railway operators on a non-discriminatory basis and against payment of a track access fee. Lane access fees must be approved by the regulatory body. Further information on the track access contract established for this rail network is available on this website.

The more attractive and profitable a concession is, the less likely a government is to offer tax breaks and other incentives. Ownership of the project assets under a concession contract remains the property of the authority, while the concessionaire receives only constructive ownership. Once the agreement is terminated, all project resources will be returned to the organization. Essentially, a concession is a license granted by government agencies to a private entity for the performance and performance of the public service, and for this purpose grants certain rights for a limited period of time held exclusively by the government under the law. In return, the government transfers certain operational risks to the private institution. The right to use routes for a defined period of time may also be part of a concession (or franchise) contract. These agreements typically combine the construction, maintenance and operation of a rail network and involve significant investments. Therefore, they grant the right to operate defined networks or individual lines for a longer period as track access agreements and often grant exclusivity to the railway operator. Example 7: Sub-Saharan Africa: Ifrikya Railway Concession – Case Study by Karim-Jacques Budin, SSATP Working Paper No. 64, World Bank, 2003 (English and French) – The case study contains a model railway concession agreement (Section 3) designed for a sub-Saharan African State.

That model contract provides that the use of the railway infrastructure operated by the concessionaire may be open to other railway undertakings in the circumstances referred to in Article 6 of the concession contract. Use by third parties is based on access agreements to specific lanes between the concessionaire and the operator concerned, for which an infrastructure charge is charged. Such agreements may be concluded either for the purpose of carrying out an infrastructure project or for the provision of services related to an infrastructure project. The question of which party will make the payment to the other party is determined by the economic viability of the project to be carried out […].