New Delhi: Nearly seven months after finance minister P. Chidambaram proposed setting up a roads regulator to address challenges such as financial stress, construction risk and contract management issues, the roads ministry is close to finalizing the structure and role of the proposed regulator.

“We will get the cabinet approval for the roads regulator by December,” Vijay Chhibber, roads secretary, told reporters at a conference organized by industry lobby Federation of Indian Chambers of Commerce and Industry.

The ministry of road transport and highways has proposed that the roads regulator have an adjudicatory role for contract dispute resolution, renegotiation of future contracts and enforcement of contractual obligations.

For issues related to renegotiation of existing contracts, tariff structuring and toll mechanisms, project entry and exit options and specific policy issues, the regulator is proposed to play an advisory role.

“Road ministry is working on these terms of reference and the constitution mechanism and organizational structure of the roads regulator is under finalization,” Chhibber said.

The roads ministry has set up a task force for looking into the framework of the authority. The ministry has proposed that the regulator be headed by a board with a chairperson and two members, to whom an executive wing with technical and secretariat support will report.

“Toll-paying users under the current architecture do not get a fair voice. We should have a third party whom users can approach if they are not being provided with the services promised in the contract,” said Chhibber. “Then we are struggling with (contract) renegotiations. A roads regulator will help address these issues.”

Economic affairs secretary Arvind Mayaram, speaking at the same conference, said independent regulators such as in the roads sector are necessary to avoid situations where private parties and government bodies are blaming each other for issues arising out of project implementation.

“Regulators must begin to do this. If there is a concession issue, if there is a problem about the economics of the project which can happen, then we very clearly look at the stress test. It should very clearly look at where culpability lies and some haircut needs to be put in place so that the moral hazard issue is properly answered,” he said.

The roads ministry saw a sharp decline in award of contracts for highways last year. Against a lowered target of 8,100km, only 1,116km of highway projects were awarded.

The ministry will ramp up award of road projects under the engineering, procurement and construction (EPC) mode in the absence of interest from private players for build, operate, transfer projects, Chhibber said.

The ministry is looking to award 6,500km of road projects through the EPC mode in 2013-14, he added.

“The primary role of the proposed road regulator should be appropriate risk and reward allocation between government, developers, lender and especially the users,” said Parvesh Minocha, managing director of the transportation business at infrastructure consultancy Feedback Infra Pvt. Ltd. “If this is done and a proper structure is put in place to implement it then the downstream remedial roles like dispute resolution and failure handling will get significantly reduced.”