« Back to articlePrint this article

Gadkari's grand plan: Rs 3 lakh cr of road projects in 6 months

May 19, 2015 10:28 IST

'Our target is to contribute two per cent of gross domestic product through the roads and ports sector.'

'We are converting 12 major ports into smart cities. This is not part of the 100 smart cities.'

'You won’t hear any complaints that roads are not being constructed or are lying vacant.'

A highwayThe National Democratic Alliance government’s focus on infrastructure is set to intensify, with new projects being lined up through the coming months.

In an interaction with Business Standard journalists, Nitin Gadkari (photographed below), Union minister of road transport, highways and shipping, says the public-private partnership model is a compulsion, so that government resources can be focused on the rural and agriculture sectors.

Edited excerpts:

A year on, how has the journey been for you?

When I had taken charge, road construction was going on at a pace of two km/day.

Today, it is 12 km/day, which could go up to 14 km/day by the end of this month. The target is 30 km/day in two years.

Under the previous government, there were a lot of problems with environment approvals; land acquisition was an issue, which led to private interest collapsing.

Our target is to contribute two per cent of gross domestic product through the roads and ports sector.

We want to award projects worth about Rs 3,00,000 crore (Rs 3,000 billion), through the PPP, hybrid or EPC (engineering, procurement and construction) model, in the next six months.

We have also planned a project for the Chaar Dhaam Yatra.

A detailed project report is in the process, for 1,000 km and involving a cost of Rs 11,000 crore (Rs 110 billion), which we will start during Dusshera.

We are also looking at adopting global standards of road construction.

With our intention of constructing concrete roads, our website, INAM-PRO, has brought down costs for cement procurement.

Six months ago, you started a toll-less national highways project. What is the status of that?

We have closed 62 toll points and issued advertisements on those.

Any project below Rs 100 crore (Rs 1 billion) has been exempted from toll. We will do 20-25 more -- 16 in Maharashtra, 12 in Uttar Pradesh.

There are 306 toll points in the country, around 18 between Delhi and Mumbai, and 20 minutes were wasted on each.

Across the world, the cost of goods transport is Rs 1.3/km a tonne.

Here, it is Rs 3/km a tonne because we do not use multi-axle trucks.

In a study, IIM Kolkata and the Transport Corporation of India said India faced Rs 80,000 crore (Rs 800 billion) of loss because of this.

We have made a company with Axis Bank and ICICI Bank and made a sticker of it, owing to which six vehicles in place of one can ply.

We will put weighing bridges -- we have put 30-40 -- which will end over-load. We estimated a cost of Rs 900 crore. Axis Bank and ICICI Bank gave us Rs 100 crore and we made a profit.

What role is your ministry playing in smart city projects?

We are converting 12 major ports into smart cities.

This is not part of the 100 smart cities.

I am not asking for any money from the government for this.

I have developed a model that will utilise the money available with ports.

These cities will have separate industrial and residential zones.

We have asked a Singapore government planning authority to devise the overall plan.

How important are public-private partnership projects?

The government does not have adequate capacity, from a technology and capital investment point of view.

I started the first PPP road project in the country when I was a minister in the Maharashtra government.

PPP is a compulsion.

We had a Rs 1,500-crore (Rs 15-billion) budget and Rs 12,000 crore (Rs 120-billion) was to be approved; so, I did Mumbai flyovers, an expressway, and the Worli-Bandra project through PPP.

I decided to use government money for rural roads and we did 16,000 roads.

The inspiration behind PPP was to give more importance to the agriculture and rural sectors.

The government has limited resources.

On land acquisition, do you think the government was caught on the wrong foot?

About 80 per cent of the land in this country is acquired for irrigation.

Our government has introduced many improvements in the 2013 land Act.

The first is related to airport development.

If a dam is being constructed on 2,000 acres and if 80 per cent of the people say it should not come up, it will not be developed.

But if water isn’t available, villages cannot be developed.

Rural infrastructure has been exempted from the consent clause.

This includes rural roads, water tanks and power transformers.

The third is affordable and low-cost housing, the fourth is industrial corridor.

Another major change we have made is increasing compensation to four times the land value in rural areas and twice in urban areas.

In 2014-15, highways were constructed at 12.08 km a day and in 2013-2014, at 11.7 km a day. There isn’t much difference between them. Yet you have awarded 7,972 km for construction this financial year, almost double that of the 3,962 km that were awarded in 2013-2014. Do you think it is viable?

Yes, it absolutely is. See, when I got the ministry, there was hardly any movement in construction.

Projects were stuck, with close to Rs 3.8 lakh crore (Rs 3.8 trillion) at stake and banks were refusing to provide loans.

Today, there are still about 20-30 per cent problems plaguing the sector but within a month, all problems will be solved.

You won’t hear any complaints that roads are not being constructed or are lying vacant.

The awarded projects are absolutely viable.

But the length of the road built during the last two years has hardly been any different. What are the measures being taken to bring the sector back on to the growth path?

We have initiated a lot of measures to increase the speed of construction, including the hybrid annuity model that reallocates the risk-sharing of road construction.

With land acquisitions and environment clearances to be our responsibility, there’s very low risk for private contractors.

For the total projects to be done, which are approximately completed, with investments close to Rs 80,000-1,00,000 crore (Rs 800-1000 billion), we will sell projects to insurance and pension funds for financing, guaranteeing them a minimum return.

While we have a budget of Rs 42,000 crore (Rs 420 billion), we can raise another Rs 60,000-70,000 crore (Rs 600-700 billion) from tax-exempted bonds from the market.

The government has awarded 7,972 km in 2014-15, of which hardly 700 km were under the BOT (build–operate–transfer) model, while the rest has been under EPC (engineering-procurement-construction). That implies there has been no revival in private interest and the government is undertaking all the projects.

That was the case when I came in as the minister, but now it is not so.

We have just awarded three projects under the PPP model.

Another road sector project worth Rs 6,000 crore (Rs 60 billion) in Delhi has been sanctioned under the same model but the Delhi government said we can’t afford to give money to the project, so we said we will build it ourselves.

About 17 hybrid annuity projects have also been awarded.

What kind of project activity do you see coming up?

I have projects of 5,000 km of Rs 1 lakh crore (Rs 1 trillion) ready with me, so I will sell it.

I will call insurance pension funds of the world and guarantee returns and give them an escrow account -- take payment per day if you want because we get toll.

It would be same way as railways have come out with bonds with six per cent (returns); I will advertise the same globally.

I can sell EPC or securitise it.

How viable will this be?

Without an internal rate of return of 12 per cent, we don’t do any projects -- we don’t to any loss business.

My toll collection is Rs 8,000 crore (Rs 80 billion) annually.

If I securitise it, anyone will give Rs 1.5 lakh crore (Rs 1.5 trillion).

I will use it to make a bridge and then securitise it again. So, money is not a problem.

Nitin GadkariYou said 25 to 50 per cent projects are still there in the roads sector and you will be going to the Cabinet. Which are these issues?

There are two sets of issues -- some project is 50 per cent complete and the contractor runs into financial problems and a Rs 1,000-crore (Rs 10-billion) project becomes Rs 1,400 crore (Rs 14 billion) and the bank says it won’t pay and even if it is ready, it asks the developer to pay 30 per cent.

How will he (pay)? Projects get stuck.

So, we have looked at this solution that we will put in our equity and we will do agreement with the bank.

And then we will ask the bank to take first our repayment with two-three per cent interest on profit.

Second, the problem is that someone has multiple projects, then he can sell the project.

Till now, there was no permission to sell a project. With the equity that comes, he will complete the other projects. But we will put a condition that the money you get from the sale will have to be put in other projects.

There were some 40 projects where we couldn’t come up with any solution.

So, we have taken these two solutions to the Cabinet, which pondered over it for quite some time and they had some reservations.

We had a meeting with Arun Jaitley. He cleared it.

Then we had a meeting with the PM and we gave a presentation.

Prime Minister’s Office also cleared their reservations.

Then it went to the Cabinet.

With these two decisions, there are no problems now.

When I talk with you next month, I will be in a position to tell you that the road sector has no problem.

Will all roads be built with cement?

Yes, 100 per cent.

Cement roads have a life of 100 years and bitumen roads have a life of five years.

In Nagpur, I had got concrete roads constructed in 1995 when I was minister (in Maharashtra).

No maintenance has been required till now.

What is the delivered cost of cement?

Through the portal, a price of Rs 120 a bag has emerged.

It is cash and carry and there is no corruption.

So, you pay first and then take the supply. You pay only transport cost and tax extra.

In some places, it comes to Rs 140-160. The transport cost is Rs 70-180, depending on distance.

We launched the website INAM-PRO, where there were 360 registered buyers but only 30 buyers.

We have sold some 125,000 tonnes cement there.

As we reduced the price, so did companies.

There is a company called Emami in Rajasthan, which told the chief minister that they would sell cement at Rs 10 lower than our price.

When we benchmarked the price of cement, the industry said ‘we will sell at lower rates, buy from us’. The contractor is not bound to buy from anyone.

How will you address the problem of radio taxis. Some companies are saying apps will be blocked. What is the government’s view on it?

This subject is in the concurrent list and it is with the states.

We can issue the guidelines but ultimately states have to enforce it. In our new Motor Vehicles Act, we have already issued (these guidelines).

What is your view on how Delhi is handling the issue? They are adamant that companies have to meet certain conditions.

I don’t want to comment on it.

Frankly, I feel everyone has a right to do business.

Make rules according to it.

Last time, I said (something on it) and a controversy was raked out of it.

(He had said if any untoward incident like the cab rape happened in a train, then the government should ban railways, too).

So you are against the ban?

I am saying everyone has to do business; just make rules according to that.

Whoever breaks it, take necessary action (against the person).

Give the best of the services.

To help a certain business, close someone else’s -- things don’t work that way.

How does the government plan to tackle the movement of bulk commodities like coal?

When we auction 300 mines, transport of coal will be a big issue.

Additional coal production will create a load.

From Haldia, coal is going on barges on the Ganga, where there are 13 power plants along the bank.

Similarly, we are trying to create movement through the Mahanadi.

We will save on fuel and cost.

Our priority is first for inland waterways, then railways and third comes road. We have appointed project management consultants for 65 inland waterways projects.

We have also made a railway corporation.

We will give out 40 contracts of Rs 2,400 crore (Rs 24 billion) under this corporation.

We will also introduce RORO (roll on/roll off) service in which some 150 trucks loaded with cars from Chennai will come to Kandla and Mundra ports in Gujarat.

And, from there they will come to Delhi, Punjab and Haryana.

Similarly, ship on their return will carry trucks from Maruti in Delhi.

Given the amount of road construction that you are planning, do you have any estimate on land acquisition? How much will it be under PPP and how much under the private sector?

Earlier, our cost of land was Rs 80,000 crore (Rs 800 billion) and now it is Rs 1.85 lakh crore (Rs 1.85 trillion).

In rural areas, if the collector estimates Rs 1 as the cost, we will pay Rs 4 and in urban areas, we will pay Rs 2.

In the previous government’s time, there was ‘up to’ in the clause (on compensation).

We have removed it.

How much is the estimate on the area you will need?

It depends on the project. We are planning a ‘highway village’ (project), where we will give amenities alongside highways.

We will have tree plantation contractors like road contractors.

There are different ways to earn income from a road (project).

We are laying optical fibres, oil pipelines along the roads to earn from it.

We want godowns and cold storages to be out of city and be on the side of highways.

In the previous government, 70-80 per cent projects would get environmental clearance but get stuck at the land acquisition level. So, is there an estimate on how much surplus land would be needed for such initiatives and what problems it will face?

When I took over, we made a list of the problems (that might come up).

We have made three agencies.

We have asked National Highways Authority of India to prepare a detailed project report of Rs 15,000 crore (Rs 150 billion).

It will make starting projects easier.

We are ready to pay and have clarity on obstacles.

How much land is to be acquired for projects over the next few years?

Land is mainly acquired for railways, metro lines, transmission lines, etc.

There is a microscopic minority in the country that does not want to see development happening.

We need to maintain equilibrium between economy and ecology.

For example, if there was 80 per cent consent clause applicable in case of Delhi Metro, would it have been developed?

What do you have to say about the allegations made by Congress Vice-President Rahul Gandhi on the land acquisition ordinance?

There are some people who convert a problem into an opportunity, while some others turn an opportunity into a problem.

It is a political strategy to stop us from doing what they could not do.

We are following a nationalist model of growth where the poor are the focal point.

Till capital investment comes into economy, employment cannot be generated, eradication of poverty will not happen, per capita income will not increase.

The Narendra Modi government has neither capitalist nor socialist thinking. We are trying to promote rural growth and for that we will use PPP model to save money in infrastructure.

Rahul Gandhi and the Congress are confused.

People who have never been a gram panchayat sarpanch were policymakers.

Sitting in Delhi, they are saying things along with non-government organisations and trying to stop development.

Why did land acquisition protest not pick up? When a road is constructed, the value of land increases 10 times.

When agriculture produce fetches more money, purchasing power increases.

There is difference in their economic thinking and ours.

They want to create an impression that the government is pro-corporate and is against minority.

They are doing wrong propaganda. Delhi runs on perception but we move on ground reality.

It is image versus reality and ground reality versus perception.

The Comptroller and Auditor General has made allegations against the Purti group. Are your business interests under scrutiny?

I am neither an industrialist nor a contractor nor a businessman.

Social entrepreneurship is common in Maharashtra.

I got 500 farmer families together and introduced things like organic farming and green power.

We have a cooperative store, which has Rs 50-crore (Rs 500-million) turnover.

People think this is business.

If I do business, I can make Rs 200 crore (Rs 2 billion) a month but I do not do this. My wife and I had shares of Rs 4,000.

But I resigned from everywhere in 2012 after I got fed up with the media.

I am not a director or an entrepreneur.

After I did not get a loan for an integrated sugar project from cooperative because the sugar industry was barred, I took a loan from IREDA for renewable power, for ethanol from Bank of Maharashtra and State Bank of Indore.

For sugar, I took loans from 16 cooperative banks.

It started in 2004, I had taken Rs 46-crore (Rs 460-million) loan. Sugarcane plantation and sugar mills were in distress and I took charge of two mills.

It became a non-performing asset of Rs 84 crore (Rs 840 million).

Of 29 companies, ours was the only one that returned Rs 72.5 crore (Rs 725 million) at 12 per cent interest in a single instalment.

All this happened during the Congress rule in Maharashtra. Where is the corruption here?

Photograph: Kind courtesy, NHAI

BS Bureau in New Delhi
Source: source image