Opinion Speed bump

Since so many large road projects have seen high-profile exits over the last one year, often due to the general slowdown, the government has done well to work on an interim solution. Creating jobs and getting the economy humming once again are urgent priorities of this government, and roads are crucially instrumental. A remedy has to be found to the private sector’s impaired ability to take on risk due to very long delays in clearances or to project costs escalating dramatically. The 3P India initiative announced in the Budget is supposed to figure out solutions. Union road, transport and shipping minister Nitin Gadkari had promised interim measures by Independence Day.

In the budget, the government had doubled the allocation for roads. In a works contract, the contractor simply gets paid for each kilometre of road built, and the risk of traffic not materialising or costs spiralling out of control is borne by the government. Under the PPP method, private firms bid for a road project — if it is unviable, they ask for viability gap funding — and then take on all risks, whether of costs escalating or sluggish business. Since green clearances have been a major problem for most projects, Nitin Gadkari has done well to discuss with Prakash Javadekar, his colleague in the ministry of environment, how to ensure quicker clearances.
But what is worrying in this matter is Gadkari’s statement that no tolling would be allowed on a project till it is complete — currently, this is allowed after 75 per cent of the road has been built — and that tolling would be stopped after the cost of the project is recovered. The 100 per cent rule would dam revenue streams and stopping collections once the cost of capital has been recovered would seriously disincentivise bidders. Gadkari himself recognises that there is little private sector interest in PPP projects, but this step makes them even less appealing. If he has a different model in mind for the long term, and he may well have one already, he should unveil it at the earliest.