Highways sector: Moving on the fast lane

Centre has awarded or almost finalised projects worth Rs 13,500 cr on BOT-toll basis in April-June FY16 against `6,300 cr in FY15

Written by Sharmistha Mukherjee | Updated: July 22, 2015 5:01 am
highway, national highway, gurgaon rewari road, gurgaon rewari, nitin gadkari, india news The cost of the project is pegged at Rs 1,537 crore. IRB Infrastructure Developers, too, will pay a premium of Rs 81 crore for developing the 124.5 km Agra-Etawah Bypass at a cost of Rs 2,650 crore.

Early indicators point to a rather sharp rebound in investor interest in public-private partnership (PPP) projects in the highways sector, with the government having managed to either award or in advanced stages of finalising projects totalling about 1,000 km worth around Rs 13,500 crore on a build, operate, transfer (BOT-Toll) basis in just the first three months of the current financial year. This is in sharp contrast to the 734 km of roads projects valued at Rs 6,300 crore that was awarded on this mode in the whole of last financial year.

Given the response, the government is now aiming at awarding about 2,000 km of highway development projects on public-private partnership basis out of its total target of 10,000 km for the current financial year. The remaining projects are to be awarded on engineering, procurement, construction (EPC) basis and under the newly conceived hybrid annuity model.

A senior official in the Ministry of Road, Transport & Highways (MoRTH) said, “We have seen that if we complete pre-construction activity prior to awarding a project, the response is good from the private sector. We have already awarded two projects in the first three months of this fiscal year; another six are in the pipeline. They have all received strong and multiple bids.”

highwayThe fiscal, around eight-odd roads projects have received multiple bids from private investors. Of these, two projects have been awarded at a premium to private developers. The 109-km stretch between Solapur-Bijapur in Maharashtra has been awarded to Uniquest Infra Venture Private Limited at a premium of Rs 6.80 crore.

The cost of the project is pegged at Rs 1,537 crore. IRB Infrastructure Developers, too, will pay a premium of Rs 81 crore for developing the 124.5 km Agra-Etawah Bypass at a cost of Rs 2,650 crore.

Besides these, the stretches for which the government has received interest from private contractors on BOT-Toll basis include Shivpuri and Devas, Raipur and Bilaspur, Hospet and Chitradurg, Reva and Jabalpur. All these projects have been stuck for at least the last three years.

“We have taken several decisions in the last few months to enthuse private interest in roads projects. Developers can now take out their entire equity in finished projects to undertake new ones. The NHAI has been authorised to loan resources to developers whose projects are stuck due to financial constraints,” added the official. For projects awarded on BOT-Toll basis, the government has approved the exit policy which allows a developer to move out of a project two years after the completion.

This has been done to free up the locked capital for further investment in the infrastructure sector.

The industry has given a thumbs-up to the government’s initiatives. Hemant Kanoria, CMD at Srei Infrastructure, said, “The government has shown all intentions to see things moving. In fact the projects that were stuck because of clearances for few years now are getting sorted and several of them have been cleared.” During the UPA regime, a total of 20,000 km of roads projects were awarded between 2010 and 2012. However, most of the projects did not take off due to unavailability of land, delay in forest and statutory clearances and economic slowdown.

When the NDA government came to power last year, work of stretches totalling 9000 km was held up. Till now 39 projects covering 4,700 km have been cancelled or letters of appointment for starting work have been withdrawn.

As many as 16 projects totaling around 1,360 km need fund infusion to start work. The CCEA has now authorised the National Highways Authority of India (NHAI) to loan resources from its corpus at a pre-determined rate of return to kickstart such projects, stalled due to lack of additional equity or inability on part of the concessionaire to disburse funds further.

“However, projects that are stuck for lack of ability of the developer to continue it or complete it have yet to find a solution. While it has been proposed that such projects be allowed to be taken over by new players, the government has not yet decided on it. Such projects are important because they are large in numbers,” Kanoria added.

The NDA government has drawn up an ambitious target to award highway projects worth Rs 3.5 lakh crore in the next six months. As many as 1,231 projects measuring 37,000 km have been firmed up for award by the ministry over the next two years.

One of the key projects is the Bharat Mala, which is aimed at developing 5,600 km of new roads in border areas at an estimated cost of Rs 56,000 crore. Another 4,700 km of roads to connect religious and tourism centres and to enhance connectivity in backward areas is expected to come up at an estimated cost of Rs 44,000 crore. Besides this, world-class highways will be developed to connect 100 of the 676 district headquarters in the country.

The government has allocated Rs 42,913 crore for the highways sector in the budget for the current fiscal, up from Rs 28,881 crore in 2014-15, to ensure greater participation in road building in absence of private investment. But with such mega projects in the pipeline, the government has also been exploring different terms of engagement to lure in the private sector in investing in road infrastructure development projects.

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