Rs 1-lakh cr road projects hit hurdle | business | Hindustan Times
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Rs 1-lakh cr road projects hit hurdle

Road development projects worth over Rs 1,00,000 crore have hit a major speed-breaker as frequent leadership changes at the highway authority, modifications in bid contracts and the general economic slowdown have resulted in waning investor interest and tardy implementation.

business Updated: Apr 20, 2009 22:50 IST
Samiran Saha

Road development projects worth over Rs 1,00,000 crore have hit a major speed-breaker as frequent leadership changes at the highway authority, modifications in bid contracts and the general economic slowdown have resulted in waning investor interest and tardy implementation.

In the past 30 months, the National Highway Authority of India (NHAI) has had four chairmen serving for a period ranging from two to 11 months even as critical projects covering a distance of 15,731 km to be awarded to bidders for execution.

The current chairman Brijeshwar Singh took charge in October last year. The NHAI chairman’s job has a tenure of three years, extendable to five years.

In the past 18 months, only seven projects were awarded against the originally planned 60 projects under phase III of the National Highway Development Programme (NHDP). The programme, first conceived in 2000, is being carried out in five simultaneous “phases” covering a distance of 33,097 km. About half of these projects (15,731 kms) are, however, yet to be awarded.

“If NHAI starts inviting about 10 to 15 bids per month, 60 projects can be awarded in a matter of next six months, which is very achievable,” Pravesh Minocha, managing director, infrastructure consulting firm Feedback Ventures said.

“Three projects under NHDP phase V are ready to be awarded, land acquisition and environmental clearances for these new projects have been taken and the bids for these projects will be invited soon,” NHAI spokesperson VK Sharma said. NHDP phase V entails six laning of 5,700 km of the “Golden Quadrilateral”.

Sector specialists said the repeated leadership changes at NHAI have also taken a toll on the progress of highway development as continuity of processes became a casualty.

Besides, concession terms have been changed recently forcing bidders to redraw their blueprints, although experts said the new criteria are more investor-friendly.

“The slowdown in terms of project awards during the last two years is due to restructuring of NHAI and the introduction of the new model concession agreement,” said Satyam Agarwal, an analyst with Motilal Oswal Financial Services.

Under the new conditions, the length of the project for a single contractor has been doubled to 200 km making them more attractive through higher economies of scale.

This would increase the quantum of viability gap funding (VGF) that a bidder can raise from designated government agencies to bridge the shortfall in financing the project. VGF, which is capped at 40 per cent of the project cost, was earlier paid in two equal installments spread between under-construction and post-construction phases. For the projects to be awarded in 2009, the entire VGF will be paid during the construction period, thereby improving cash flows.