After lull,highway projects see aggressive bid offers

Bid winners have quoted up to 45 below NHAI benchmark cost

After a lull of around a year,there is a sharp rebound in the interest among developers for road projects,with new sections being offered on the engineering procurement construction or EPC format.

Five of the six road projects offered by the National Highways Authority of India NHAI in the first month of the current fiscal,covering a total length of 339 km,has been offered under the EPC mode.

The remaining one project has been awarded on the BOT-toll build operate transfer model,the predominant format under which projects were being offered to developers over the last few years.

Interestingly,developers who have bagged these EPC projects have put in aggressive bids that quote as much as 45 per cent lower than the NHAIs benchmark cost.

The interest among developers is also reflected in the fact that EPC projects have seen a deluge of bids coming in,with the highest number of bidders putting in quotes for a section pegged at 28 and lowest at 11 for the five projects awarded in April.

In an EPC project,the contractor has to quote the cost of constructing or upgrading the road section,which is completely funded by the government. Every project has an estimated project cost and the developer offering to complete the project at the lowest cost gets it.

The kind of bids,we are getting for our EPC projects,clearly indicates that road projects are still in demand and road building remains a profitable business. The kind of interest with the EPC projects,we also intend to provide money to road developers,who are not in good financial position now, said a senior NHAI official.

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Industry insiders say that EPC projects will generate interest,as they involve less risks but fear that completion of these projects could also face difficulties due to mining ban in states.

The mining ban in various states is still an issue and lot of projects are facing difficulties in getting soil to make the foundation for road projects. This is one of the issue that needs to be resolved to ensure quick completion of projects, said M Murali,secretary general of National Highways Builders Federation.

The award of road projects has also slowed down and awards by NHAI reached a new low in 2012-13,when they could award projects covering only 800 km. Even as the slowdown in the economy was blamed for the reason for the fall in awards,the dismal show was preceded by a high-performance year.