GPIL announces IPO of 1.65 crore equity shares

March 7, 2008

CHENNAI: With an aim to fund some of its major projects in India, Gammon Infrastructure Projects Limited (GPIL) on Friday announced an initial public offering of 1.65 crore equity shares of par value Rs 10 each for a cash price to be determined through a 100 per cent book-building process (Issue). The price band has been fixed between Rs 167 and Rs 200 pewr equity share. Pervez Umrigar, Managing Director, GPIL, told reporters here today that the Issue’s proceeds would be utilised in the design, construction and maintenance of projects including the four-laning of the 99.5 km of Vadape-Gonde section between Mumbai and Nasik on NH-3, being developed and maintained by the special purpose vehicle (SPV), the Mumbai Nasik Expressway Limted (MNEL). “We currently have 14 infrastructure projects, including the Vishakaptanam port project in Andhra Pradesh and Mattanchery bridge project in Kerala among others in the operation phase, with respective special purpose vehicles (SPVs) in place to develop and maintain them,” Umrigar said. The Rangit-II hydroelectric power project on River Nimbi in Sikkim, and the MNEL among others were in the development phase, he added. According to a company release, the Issue comprises a net issue of 1.49 crore equity shares to the public (Net Issue) and a reservation of 16.55 lakh equity shares for employees. While at least 60 percent of the Net Issue will be allocated on a proporationate basis to Qualified Institutional Buyers (QIB), at least 10 percent of the same would be available for non-institutional bidders and 30 percent of the Net Issue for retail investors on proportionate basis. The issue opens on March 10 and closes on March 13, 2008. Source: http://economictimes.indiatimes.com

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Private sector shying away from NE road projects

March 7, 2008

NEW DELHI, March 6 – The Centre may be ready with funds for developing the road sectors in the North-East, but projects have been hit with few takers from the private sector. The lack of response from the private sector has led a Parliamentary Panel to remark that it was disappointed to note that the government initiative did not yield much result in the development of road projects in the North Eastern States.President, Prathibha Devisingh Patil, while addressing the joint session of the Parliament had mentioned about infrastructure projects in the North-East. The SARDP- NE with a funding of Rs 43,000 crore has been formulated to construct, improve and widen roads in the region. However, the government’s offer so far has not yielded the desired results from the private players, slowing down implementation of the projects. The incentives announced by the government for participation of private sector in road sector of NER would invite good response and hopes that NES would get a better road connectivity, said the Parliamentary Standing Committee on Transport, Culture and Tourism.The Centre has a number of projects in the pipeline for the region including upgradation of 588 km of various National Highways (NHs) to two-lane under Phase A of Special Accelerated Road Development Programme for North-East (SARDP-NE) through private sector participation.The Centre had way back in 2005 cleared the construction of the projects on BOT basis. Thereafter, National Highway Authority of India (NHAI) invited bids for the most trafficked corridor from Jorabat to Barapani in Meghalaya. But there was no response from the bidders.Later, the Government sanctioned the projects on BOT (Annuity) basis. Further, NHDP:III B, which includes four lanning of 1051 km on NH in NER, has been cleared last year. Currently, detailed project report is under preparation by NHAI, the Committee has been told.It was recommended that the Department undertake a proper scientific study and take the consequent measure to modify the rules and procedures, if necessary, for participation of the private sector in road projects in North-East. Meanwhile, the Ministry has proposed quality audit for SARDP-NE, with possible involvement of IITs. The monitoring of quality of works would be considered through individual experts to be engaged through National Road Congress. Further, reputed institutes such as IITs would be involved for conducting tests and materials and works being executed by the contractor.

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NHAI starts work on Rs6,672 cr expressway

March 6, 2008

The expressway itself will be 400km long and will cost around Rs16.68 crore per km New Delhi: The National Highways Authority of India, or NHAI, has started preliminary work on awarding its biggest contra-ct yet, worth Rs6,672 crore, for an expressway between Vadodara in Gujarat and Mumbai.Gujarat is among the most industrialized states in the country and a major hub for petrochemical and chemical companies. Mumbai is the country’s financial and commercial capital and is also home to India’s busiest port. The Vadodara-Gujarat route is a busy one in terms of freight traffic.Last year, NHAI awarded two contracts to IRB Infrastructure Developers Ltd and Larsen and Toubro Ltd (L&T) to upgrade stretches of highway between Bharuch and Surat and Vadodara and Baruch, respectively. These stretches are part of the existing highway between Mumbai and Vadodara that runs parallel to the proposed expressway.Officials in NHAI admit that traffic on the route is growing at a scorching pace.“We were always aware that an expressway would be built between Mumbai and Vadodara,” said V.D. Mhaiskar, chairman and managing director of IRB Infrastructure.The expressway itself will be 400km long and will cost around Rs16.68 crore per km. The largest contract awarded before this by NHAI was for Rs2,500 crore to build a highway between Panipat and Jalandhar, according to A.V. Sinha, member (technical), NHAI.NHAI, the regulator for the Indian highways sector and the entity responsible for the award of contracts to build roads, will appoint a consultant for the project and decide on other contours of the expressway by July. The call for bids will come after that and the expressway is expected to be completed by 2015.As is the case with most NHAI projects, the expressway will be built on a build-operate-transfer (BOT) basis wh-ere a private developer builds the road, operates it for a certain period, and then transfers ownership to the state.“The expressway will charge around 30% more in toll rates and, so, not all vehicles would shift to the expressway (from the highway),” said Sinha.The stretches owned by the IRB and L&T consortia are currenly being upgraded and are expected to be completed by July 2009.“There is a revenue share agreement between NHAI and us that if traffic exceeds 108,000 vehicles per day, we share that with the authority. By the time this expressway is built, we would have reached that mark,” Mhaiskar said.Mhaiskar estimated current traffic in the Bharuch-Surat stretch at between 60,000 and 70,000 vehicles per day.Source: http://www.livemint.com

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Uttar Pradesh govt plans five more expressways

March 6, 2008

Combined length of 1,400km proposed; roads will be in vicinity of highways being developed by NHAI

The Uttar Pradesh government is planning five more expressways in the state even before it signs the concession agreement for the Rs40,000 crore Ganga Expressway project awarded in January.

And yet again, just as in the case of the Ganga Expressway, the proposed highways are coming up in the vicinity of the highways being developed by the National Highways Authority of India, or NHAI, the roads regulator.

“We will not approach the Centre for any kind of assistance in funding. As in the case of the Ganga Expressway, we will raise resources for these projects by leveraging land,” said an official, who was involved in the planning of the Ganga Expressway project as well, but did not wish to be identified.

Country roads: The Greater Noida expressway. UP had awarded the tender for the Rs40,000 crore Ganga Expressway project, which will connect Greater Noida with Baflia, to Jaypee Infratech Ltd in January. (Madhu Kapparath / Mint)

The tender for the Ganga Expressway project, which will connect Greater Noida with Ballia, was awarded to Jaypee Infratech Ltd in January. The concessionaire is expected to be leased around 7,000ha of land for commercial development in order to construct the expressway.

Jaypee had sought land worth Rs293.55 crore for property development along the expressway in order to construct the expressway.

The five proposed expressways will have a combined length of around 1,400km.

“We do not have a clear idea as to how much land will be required to be set aside for these projects, but we will be able to work out those details only after a few months,” the same official said.

The proposed expressways include the Greater Noida-Saharanpur-Dehradun (in partnership with the Uttarakhand state government) stretch apart from Jhansi-Lucknow, Lucknow-Gorakhpur, Agra-Kanpur-Lucknow and Farrukhabad-Kotdwar expressways.

The proposal for these projects is being developed by the state public works department. “First we will seek environmental clearance for these projects and then the proposals will go to the state cabinet for approval,” the official said.

Planning Commission member Anwarul Hoda said that the apex planning organization in the country has not yet been informed about the state’s plans to go in for more expressways. “We have not been told about these projects,” he said.

Earlier, the Planning Commission had held discussions with the UP administration on the Ganga Expressway project in order to see whether the project linked up with existing highway networks in the state. It gave the go-ahead despite the overlap with the highways being developed by NHAI.

“Tolling on these roads will barely pay for operations and management expenses,” said a consultant with a project management company, who did not wish to be quoted. “Remember, these roads are along the same alignment as existing NHAI national highways, which means traffic is going to be shared. So, the capital cost recovery will come from the land component only. If you are in the business of building highways, then why do you need all this land.”

Source: http://www.livemint.com

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4-LANING OF DELHI-DEHRADUN NATIONAL HIGHWAY

March 5, 2008

Delhi – Dehradun National Highway has been identified for 4 laning under National Highway Development Project (NHDP) Phase III on Build, Operate & Transfer (BOT) basis. Widening to 4 lane work in Meerut-Muzaffarnagar section is in progress and delayed due to initial problem regarding tree cutting & land acquisition and is targeted to be completed by March, 2009. Widening to 4 lane work in Muzaffarnagar-Haridwar section could not be awarded as only single bid was received and the same was cancelled. For re-bidding of this section, updation of Detailed Project Report (DPR) as per new Model Concession Agreement (MCA) as decided by Public Private Partnership Appraisal Committee (PPPAC) is in progress.The Haridwar-Dehradun section is passing through Rajaji National Park and clearance is to be obtained from the Central Empowered Committee constituted by the Hon’ble Supreme Court of India. After clearance from Central Empowered Committee and PPPAC, bidding process is to be taken up for award of 4 laning work. This information was given by the Minister of State for Shipping, Road Transport and Highways, Shri K.H. Muniyappa in a written reply in the Lok Sabha today. Source: http://pib.nic.in

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DF govt to spend Rs 3000 cr on road to power

March 3, 2008

Though its four-year rule in Maharashtra is yet to bring a visible change in the state, the Democratic Front (DF) government now wishes to make amends during its final year in office.

For the 2008-09 fiscal, the state will witness large-scale road construction works, senior officials of the Maharashtra State Road Development Corporation (MSRDC) and Public Works Department (PWD) told ET. The two agencies, which have been keeping a low-profile during the DF rule, compared to the 1995-1999 Shiv Sena-BJP government’s period, want to make up for the lost time. “We will have many more projects to showcase before the people,” Maharashtra chief minister Vilasrao Deshmukh had said earlier.

Road works amounting to more than Rs 3,000 crore have been initiated by these two agencies across the state. All projects are being undertaken on build, operate and transfer (BOT) basis and the state agencies are collaborating with the National Highway Authority of India (NHAI). Such is the project’s volume that the PWD, MSRDC and NHAI would upgrade around 900 km of roads across Maharashtra.

“Most of the roads under construction would be completed in a year or so. We are following a strategy of aggressive development in the road sector, which is one of the main drivers of socio-economic growth. Roads not only connect but also bring investment,” PWD secretary DB Deshpande told ET.

The state is using the Rs 2,000-crore grant sanctioned by the Union government to upgrade the corridors of national highways, which pass through Maharashtra. This allocation has to be used in the 2008-2009 fiscal. The work includes six-laning of the 90-km corridor between Dahisar-Talasari on Mumbai-Ahmedabad National Highway, the 275-km corridor between Satara-Karad-Kagal, which leads to Bangalore, the 86-km stretch between Igatpuri and Pimpalgaon and construction of an elevated 5.5 km long corridor bypassing the Nashik city.

“Maharashtra has always been regarded as the leading state as far as quality of road is concerned. But good roads have utility beyond the obvious connectivity point of view. The World Bank has estimated that an investment of Rs 20 lakh in road works creates one perpetual job.

We are looking at employment generation and economic potential of roads, which would be give an edge to Maharashtra in these industrially competitive times,” an MSRDC official said. Lot of action is also visible on the state highways. The PWD has got Cabinet approval for the Rs 800-crore four-laning of Shirur-Nagar-Pune-Aurangabad state highway, which is 300-km long. “Work has started on this project and should be completed by May 2009,” Mr Deshpande added.

Source: economictimes.indiatimes.com

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Nine infrastructure firms in customs net

March 3, 2008

Gammon India, Punj Lloyd, Era among those being investigated for diverting tax-exempt equipment for pvt work

The central intelligence unit of Indian customs here has launched a series of cases alleging import duty evasion by nine infrastructure firms, including well-known names in the field such as Punj Lloyd Ltd, Era Constructions (India) Ltd and Gammon India Ltd.

The companies are alleged to have diverted construction machinery, imported without customs duty specifically for projects financed by the United Nations, other international aid organizations and approved by the government, to private projects, thus evading customs duty.

The money involved in the case is not large in itself, but the development is significant since these firms are involved in construction of roads for projects approved by the National Highways Authority of India (NHAI) and aided by the World Bank, Asian Development Bank and the UN.

Under the Customs Act 1962, equipment imported into India for completion of infrastructure projects financed by the UN or an international organization and approved by the government is exempt from customs duty. The firms had imported machinery, such as piling rigs for construction of roads, and had availed the exemption.

Core of the problem

“We have already booked cases against nine firms and have recovered over Rs12 crore against such illegal import of piling rigs,” said R.K. Mahajan, commissioner (general) of customs, Mumbai.

Apart from Punj Lloyd, Era Constructions and Gammon India, the list of companies provided by the customs includes Afcon Infrastructure Ltd, Ircon International Ltd, Meher Foundation and Civil Engineers Pvt. Ltd, Villayati Ram Mittal Pvt. Ltd (New Delhi), Vijay M Mistry Construction Pvt. Ltd and Maytas Infra Pvt. Ltd.

Each piling rig costs around Rs4 crore and attracts close to Rs1 crore import duty.

“We have also seized piling rigs worth Rs8.25 crore,” Mahajan said. According to him, these companies have evaded customs duty of at least Rs20 crore and the amount could be even more as the investigation is not yet complete.

The infrastructure projects are spread across India. For instance, Punj Lloyd, one of the largest engineering and construction firms engaged in infrastructure projects, had imported piling rigs for its two NHAI-approved projects in Assam, but, according to the customs intelligence unit, these rigs were diverted to New Delhi.

“The company had rented out one of the machines to Delhi Metro Rail Corp. Ltd,” claimed a senior officer of customs who did not wish to be named.

However, the firm admitted it has been “summoned by the central intelligence unit, Mumbai customs, seeking certain clarifications/information pertaining to import of hydraulic operated self-propelled piling rig along with accessories,” imported by it under customs duty exemption scheme.

“Unfortunately, by the time such rig, along with its accessories, touched the boundaries of India it was realized that the said rig etc. could not be optimally utilized at the Guwahati to Nalbari Section of NH31 in Assam project due to non- availability of work… Since the machinery so imported was worth crores of rupees and keeping it idle would not only result in decaying and deterioration but also have an adverse financial impact…the company deemed it prudent to deploy the same to some other appropriate site,” the company wrote in its email.

It admitted that the rig was deployed at the DMRC project “which included construction of roads.” Stating that “by utilizing the…rig at the DMRC project we were in a position to keep the same in running condition,” the company said in its email that the rigs would be used at the Assam project “the moment we receive a green signal…from NHAI.”

“We believe we have acted within the intent and framework of the customs notification and the undertaking and there is no violation of any nature whatsoever and your source on information about the tax evasion on our part is unfounded and baseless,” the email went on to say.

The New Delhi-based Era Constructions, now known as Era Infra Engineering Ltd, was awarded two contracts for construction of roads in Chhattisgarh. However, according to the customs, the machinery was allegedly rerouted to other parts of India. “During the investigation, one of the machines was found at the NTPC Ltd’s site in Dadri in Uttar Pradesh. The other was found in Haryana,” Mahajan said.

Era Infra’s vice-president (commercial) Anil Bhasin said the firm had paid customs duty and interest for the equipment, which was shifted to other nationally important projects of government and public sector undertakings. According to him, the company diverted a few equipment that were not required at the assigned projects to other sites. It actually wanted to return these equipment, but could not do so as there was no provision to return such equipment. “The customs duty for such equipment was paid,” insisted Bhasin.

Gammon India, a Mumbai-based construction firm, according to Mahajan, has violated the rules by diverting machinery to another location for private use. However, he declined to disclose the location where the equipment was transferred and said the case was under investigation.

Gammon India, too, denied being involved in customs duty evasion. “There may be a possibility that some construction companies who have imported equipment under such exemptions could have utilized the same for projects other than for which such exemptions are applicable like, real estate, housing projects, shopping malls, etc. To clarify your doubts, Gammon does not undertake real estate/housing projects which could have been a potential misuse as per your concern. In fact, central intelligence unit had enquired about the utilization from all the importers who had imported equipment under the above exemptions,” said Umakant Tiwari, assistant general manager (procurement), Gammon India, in an email response.

Source: livemint.com

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A capital cost of capacity

March 3, 2008

Demand is growing faster than anticipated. And there is such dearth of infrastructure that new capacities will be absorbed promptly

Last month, the showpiece urban transportation project, the 28km Delhi-Gurgaon expressway was inaugurated. Another big-ticket project, Bangalore International Airport Ltd, is set to begin operations in March. In the case of the expressway, traffic on the first day was what was projected for 2013. In Bangalore, the passenger traffic will cross 11.3 million—a number initially projected for 2015—by the end of the year. In both cases, capacities for the first year are inadquate.

Clearly, the project planners in both instances got their projections quite wrong. But, if one steps back, a more complex picture emerges. The most obvious fact is that demand is growing faster than anticipated. And there is such dearth of infrastructure that new capacities will be absorbed promptly. In contrast, China seems to be a case of excess capacities.

Another factor being debated is that this is not a simple case of an owner-operator failing to anticipate traffic. Any entrepreneur would see the obvious and plan for it. Instead, it is argued, given the cost of capital, one shouldn’t expect anything different. Our real interest rate—corrected for inflation—is about 7%, probably among the highest in the world. Hence, the entrepreneur’s action would be an error of commission—to minimise project risk.

The other side of the coin is that the pricing of public services is subsidized, largely to ensure that the less well off can avail the benefits. In other words, far more people can afford to consume these services than otherwise. While not making a case for leaving out these segments, there is need to strike a correction.

The reason is simple.

Subsidized consumption, like other political largesse, comes at a fiscal cost. Not only does this push up the cost of capital, it also—since government borrowings inevitably expand money supply—stokes inflationary pressures, hurting the very people that the government set about protecting. In China it is the opposite, where fiscal profligacy subsidizes investment.

Both extremes are unsustainable. Given India’s mixed socio-economic demography, there is a case for revisiting subsidized consumption. A good beginning would be if the political parties arrive at a consensus that ensures bad economics will no longer be passed off as sensitive politics.

A precedent exists. Gujarat, in the early 1990s, had come out with a document detailing an all-party commitment to structural reforms in the state. That no doubt underlines the economic success of the state over the past decade.

Source: livemint.com

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Impact of Budget 2008 on infrastructure

March 2, 2008

Chennai: The biggest benefit that the latest Budget has conferred on the entire infrastructure sector is the removal of double tax on dividends, says Kuljit Singh, Partner, Ernst & Young.“As infrastructure projects are typically developed through SPVs (special purpose vehicles), removal of double taxation can lead to a saving of at least one level of dividend taxation (in the existing level of 16.995 per cent including surcharge),” he explains in an e-mail interaction with Business Line.“Additionally, at present a large number of developers are looking to set up holding companies for power, highways, ports and so on. The valuation of all of these holding companies would be positively impacted due to this measure,” foresees Kuljit.Another positive from the Budget for infrastructure projects that he mentions is the reduction of duty on project imports from 7.5 per cent to 5.0 per cent. A key negative, however, is the duty structure on cement, which is expected to push up costs, rues Kuljit.While the Union Budget for 2008-09 addressed the needs of various infrastructure requirements including that of social and rural infrastructure, there was not much to offer as tax sops, or for promoting private sector investments, bemoans Vishwas Udgirkar, Executive Director – Government Regulation and Infrastructure Development Practice, PricewaterhouseCoopers.“As evident from various reports and documents, the Government is relying on huge investments from the private sector to create infrastructure that can support the overall economic growth,” he reasons. It was expected, therefore, that the Budget would address various issues relating to financing of infrastructure.“On that ground, the Budget has little to offer except the proposed change in the treatment of dividend distribution tax (DDT).” Vishwas concedes, though, that this could be a significant measure to encourage infrastructure financing, welcome by the industry.Another financial measure that he highlights is the exemption of TDS (tax deduction at source) on listed corporate debt instrument, which is expected to help, over the long term, in the development of the debt market.The Budget, however, has not addressed a number of issues like exempting foreign borrowings by infrastructure companies from withholding tax requirements, providing similar capital gain tax treatments for listed and unlisted equity, treating infrastructure holding companies as a separate class of NBFCs (non-banking financial companies), exempting Section 80IA companies from minimum alternative tax (MAT) and re-introducing Section 10(23G), lists Vishwas.Talking of the power sector, among the infrastructure components, Kuljit also finds it upsetting that the Budget has not mentioned the extension of section 80IA tax benefit for power projects.“Non-extension of this tax benefit will have a negative impact on power projects which are being proposed today, as most of these may not be completed before March 31, 2010, which is the last required date for commissioning under the existing 80IA tax provision of the Income Tax Act, 1961.”The national fund proposed for power transmission and distribution (T&D), if properly structured, can be used to strengthen the T&D network at the state level, suggests Kuljit. “Also, the allocation of Rs 5,500 crores for Rajiv Gandhi Grameen Vidyut Yojana will positively impact the state-level networks.”As regards roads and highways, he sees nothing significant in the current Budget, but for an increase of around Rs 2,000 crore being proposed in the NHDP (National Highways Development Project), and an allocation of additional Rs 4,000 crore for rural roads.In the medium to long term, the cut in excise duty from 16 per cent to 12 per cent for small cars may lead to increase in traffic on roads, thus positively impacting toll roads, he anticipates.Vishwas is of the view that the focus on nationwide monitoring of all important programmes is a welcome step, but cautions that such monitoring systems have to be put in place quickly.What about aviation? Despite the fact that airlines (in particular, low-cost airlines) are now increasingly serving the masses, aviation is still perceived as the preserve of the rich and hence the tax policies are structured accordingly, laments Kuljit.“The industry was keenly expecting reduction in sales tax (from the 20 to 30 per cent levels to around 4 per cent) on ATF (aviation turbine fuel) and changes in tax on lease rentals,” he reminds. “However, none of these expectations has been accepted in the Budget, which means that the airline industry’s rough patch may continue.”**Source: http://InterviewsInsights.blogspot.com

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Highways rev into the fast track

March 1, 2008

Fasten your seat belt and get ready to zoom on Indian highways. The FM has increased the outlay for the National Highway Development Programme from Rs 10,867 crore in last Budget to Rs 12,966 crore this time. With the surface transport ministry just having finalised new model concessionaire agreements and other policies, it is set to put implementation in the higher gear. “We have a big implementation plan for next fiscal that includes six or four laning of highways. The progress will be at a very fast pace now as the Budget gives NHDP a big push,” said Brahm Dutt, secretary, ministry of surface transport and roads. Among the ongoing projects that will get a push — finishing the 5,846-km golden quadrilateral linking Delhi-Mumbai-Chennai-Kolkata that’s already 96.48% complete and making progress on the 7,300-km north-south and east-west corridors that are 23.36% ready. The FM laid emphasis on Northeast and said the existing 180 km would go up to 300 km in 2008-09. Source: http://timesofindia.indiatimes.com

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