Road grants to span 10 years

In a major setback, the government has decided to spread the payment of the 40 per cent capital grant for upcoming build-operate-transfer road projects over 10 years, against the current practice of giving it upfront to private operators.

Operators taking up the 48 new build-operate-transfer road projects, announced in the Budget for 2003-04, will, therefore, not qualify for upfront capital grant payout.

The payout has been spread over a 10-year period, even as the funding cap for bidding for the grant component for these projects has been retained at 40 per cent. The 10-year payout period, as proposed by the government, would exceed the construction period for road stretches that would take around 7-8 years to complete, a private operator said.

"The idea of having the grant component spread out over time is to ensure that the private operator bears a sufficient amount of funding risk during the concession period," a government official said. Operators would, therefore, have to bring in their own capital during the construction period, the official said.

These road projects will be included among the projects to be funded by the Rs 2,000 crore (Rs 20 billion) annual revenue stream announced by the finance minister as a part of the viability funding of infrastructure projects.

The amount to be spent on road projects is still unclear, since the corpus is also supposed to finance port, airport and railway projects, government officials said.

Private players, who have submitted expressions of interest (EoIs) for around 23 projects on offer this fiscal, are averse to this clause and want either the 40 per cent cap to be raised or an upfront payment of the capital grant component, as is the general practice.

In case of build-operate-transfer projects, the bidding takes place on the extent of capital grant to be provided by the government to the operator.

The first lot of 23 contracts covering 3,003 km of national highways is scheduled to be tendered this fiscal.

These projects form a part of the four-laning of 10,000 km national highways that the ministry of road transport and highways will take up over the next 4-5 years.

These projects are over and above the 13,000 km of national highways being upgraded under the Rs 58,000 crore (Rs 580 billion) National Highways Development Project.