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Rediff.com  » Business » NHAI to award projects worth Rs 55,000 cr in FY15

NHAI to award projects worth Rs 55,000 cr in FY15

May 11, 2014 10:52 IST

NH 28 near Basti, Uttar PradeshThe National Highways Authority of India (NHAI) has set a target to award road projects totalling 6,000 km during the current financial year.  

According to NHAI’s estimates, the combined worth of these projects is around Rs 55,000 crore ( Rs 550 billion).

Of these, projects worth Rs 6,500 crore ( Rs 65 billion) have all the necessary clearances and, hence, ready to be awarded.  

NHAI has already acquired the land needed for the projects to be awarded soon and got the necessary clearances so that the new government can fast-track awarding of the projects.  

“We have been keeping projects ready to be awarded.

It is the prerogative of the new government to decide on the mode on which they are to be awarded.

There is a lot of work that needs to go into the process.

Our job is to keep all the projects in the shelf that can be awarded soon,” said a senior NHAI official.  

Of late, NHAI has been struggling to complete existing projects and award new projects in the wake of a slowdown in the domestic economy as well as a lack of participation by private-sector road developers.

A large number of road developers had also threatened to walk out of crucial road projects, which were awarded during 2010-2012.  

“We are looking at awarding 2,300 km of road projects under the EPC (engineering, procurement and construction) mode and another 3,700 km of road projects under the PPP (public-private partnership) mode.

The concern with awarding project under the PPP mode is that we are yet to understand if the market is willing to invest in road projects,” said another official from NHAI.  

Under the EPC mode, the government funds the road projects and a private developer undertakes the project.

On the other hand, under the PPP mode, the private developer develops the road project and collects his return through toll or annuity.  

Over the past few years, road developers have been staying away from projects.

The last time they bid aggressively was during 2010-2012 when the government awarded a record 147 road projects worth Rs 1.47 lakh crore ( Rs 1.47 trillion).

The high expectation while bidding was attributed to India's high economic growth, which has slowed considerably over the past few years.  

“Developers now take a mature stand and are likely to be careful while bidding for road projects.

But we are not likely to see the kind of aggression we saw from companies earlier,” said Abhaya Agarwal, partner at EY, a tax and audit consultancy.  

As of now, road projects worth Rs 83,000 crore ( Rs 830 billion) are pending completion.

Since 2009, the United Progressive Alliance (UPA) government has recorded the completion of only three projects, adding a meagre 315 km to the existing highways’ network.  

Last year, the government awarded less than 1,500 km of road projects under the EPC mode after it found no takers for PPP projects.  

The National Transport Development Policy Committee, headed by former Reserve Bank of India deputy governor Rakesh Mohan, had earlier pegged private investment needs in the road sector at Rs 6.65-lakh crore ( Rs 6.65 trillion) over the next 20 years.

This translates into Rs 33,250 crore ( Rs 332.50 billion) a year, which is less than the total value of projects awarded under the PPP route in 2010 (Rs 51,354 crore or Rs 513.54 billion).  

Not-so-smooth  

* NHAI has been struggling to complete existing projects and award new ones in the wake of economic slowdown and lack of participation by private developers.  

* A large number of road developers had also threatened to walk out of crucial road projects, which were awarded during 2010-2012.  

* As of now, road projects worth Rs 83,000 crore( Rs 830 billion) are pending completion.

Manu Balachandran in New Delhi
Source: