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Journalism of Courage
If inordinate delays and expensive inconveniences seem to have dogged the fate of publicly owned roads in the country so far, the infusion of private blood into the business is rapidly transforming its fortunes. In what is a strong indicator of the success of public private partnerships (PPPs) in the sector, three of the 16 road projects undertaken on a build-operate-transfer (BOT) toll and annuity basis have been completed well ahead of time, while 11 more ongoing projects are set to go down the same road.
“Three road projects, namely the Jaipur-Kishengarh highway, Belgaum-Maharashtra road and the Nellore bypass, given on a PPP mode have been completed up to six months ahead of time while adhering to all quality parameters,” said an official at National Highways Authority of India (NHAI). “We expect several other current projects underway to also finish three to six months before the scheduled completion date.”
While the 90-km Jaipur-Kishengarh road project was awarded to GVK on a BOT toll basis in April 2003, it was completed in a record 24 months against the sanctioned 30 months allowed. The 77-km road that connects the Maharashtra border to Belgaum district, awarded to a consortium of Infrastructure Leasing & Financial Services and Punj Lloyd in June 2002, also managed completion two months ahead of schedule. The Rs 173 crore Nellore bypass was also unveiled before time, providing a boost to trade between the eastern corridor and south India.
Among the current projects that are likely to see the light of day sooner than expected are the Dhule-Pimplegaon stretch in Maharashtra, the Panipat Elevated Highway, the Salem-Kerala and Salem-Karur border roads, a stretch connecting Karur to Madurai and a number of ambitious south Indian projects like the 92 km long Ulundurpet-Padalur road.
Ringing in the efficiency are public sector IRCON and private companies like Soma Enterprises, Larsen and Toubro (L&T), IVRCL, Reliance Energy, GMR Infrastructure, Madhucon Steel, SREI Infrastructure and Navayuga Engineering, which are making the most of a liberalised road sector to drive home the moolah. GVK’s Jaipur-Kishengarh road is a case in point. While the project had no dearth of “right of way” problems, encroachments and environmental clearance issues (the company had to relocate over 600 religious structures across the 90 km stretch), an efficient scheme ensured that the project stayed on track.
The company outsourced the road construction work to two engineering, procurement, construction (EPC) contractors L&T and BSCPL. Each of these contractors was assigned the task of building the road from opposite ends of the stretch, ensuring maximum time and resource utilisation.
GVK also formulated a harsh disincentive scheme if the EPC contractors failed to adhere to schedules. “We enforced stringent liquidity damage clauses into the contract,” said Issac George, chief financial officer, GVK. “If the contractors failed to finish the project on time, they would have to compensate us for toll collection losses to the amount of Rs 25 lakh every day. At the same time, we also offered them a bonus if they completed ahead of the schedule.”
With a six month premium on completion date, each of the contractors pocketed a cool Rs 25 crore as bonus, even as GVK came out richer by Rs 50 crores due to toll revenues. “It is possible to complete projects well before time if you have the right relationship with road implementing agencies and if your finances are in order. That’s where the private sector can bring in efficiencies,” said George.
