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

Written by ITW Editor · Filed Under BOT, Construction, Infrastructure, Investment and Finance, Maharashtra, Power, PWD

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

Written by ITW Editor · Filed Under BOT, Construction, Delhi, Infrastructure, Investment and Finance, NHAI

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

Written by ITW Editor · Filed Under BOT, Construction, Expressway, Gurgaon, Highway, Projects

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

Written by ITW Editor · Filed Under BOT, Construction, Delhi, Highway, NHDP

Hit the road: Infrastructure growth is revving up

February 29, 2008

The indian infrastructure story is just waiting to unfold. It is a foregone conclusion that the need for infrastructure to facilitate economic growth in India, both immediate and long-term , is ever more pressing. The growth rates witnessed in the Indian economy today are indicative of the change to follow —infrastructure has been expanding at an accelerated pace to support the economic growth rate of 9%. India’s infrastructure development has so far been predominantly financed publicly. The urgent need of the hour is an enhanced approach that would create a balance between public and private sector roles, complemented by transparent public policies. The Government has already taken many proactive measures such as opening up a number of infrastructure sectors to private players , permitting foreign direct investment (FDI) into various sectors, introducing model concession agreements and taking up projects such as the National Maritime Development Programme and National Highway Development Project, among others. The next four to five years will witness implementation of some key infrastructure projects such as additional power generation capacity of 70,000 MW; development of 16 million hectares through irrigation works; modernisation and redevelopment of four metro and 35 non-metro airports; six-laning 6,500 km of Golden Quadrilateral and selected National Highways. Focus will be on key infrastructure sectors of highways, ports, airports, railways and power. Having been part of the Indian infrastructure history, we at GVK have always believed that the key to developing a sustainable infrastructure in India is to build for the future. India will see an investment to the tune of $500 billion in infrastructure in the next five years. Coupled with government support, this investment will fructify in the form of key infrastructure projects to strengthen India’s cities. The next four years will bring a sea change in infrastructure and as a result, in another ten years, we will see the emergence of a new India. Source: http://economictimes.indiatimes.com

Written by ITW Editor · Filed Under BOT, Default, Highway, Infrastructure, Investment and Finance

TWO-LANING OF NHS ACROSS THE COUNTRY

February 28, 2008

There is no proposal of two-laning of all single-lane NHs across the country on BOT basis, which are not covered under approved phases of NHDP. However, NHDP-Phase-IV, involving upgradation of NHs to two-lane standards with paved shoulders primarily on BOT basis, is yet to be approved by the Government.

The Eleventh Five Year Plan (2007-12) endorsed by the National Development Council (NDC) during its meeting held on 19.12.2007 recommended that the targets for stretches other than NHDP have to be prioritised according to their importance to the national economy so that the available resources are not spread thinly among competing projects. The major targets for non-NHDP components include:

i. Accelerated efforts to bring NHs network to a minimum of two-lane standard within the next ten years and four-laning small segments of non-NHDP stretches.

ii. Removing existing deficiencies, like inadequate capacity, insufficient pavement thickness, etc. in the road network by strengthening the National Highway network/improving riding quality.

The condition of the National Highways (NHs) is monitored on regular basis. Further, the development and maintenance of NHs is a continuous process to keep them in traffic worthy conditions and are taken up as per the availability of funds, traffic intensity and inter-se priority.

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 Rajya Sabha today.

Source: pib.nic.in

Written by ITW Editor · Filed Under BOT, Construction, IVRCL, Karnataka, NHAI, NHDP, Reliance

Nagpur Sical Gupta road terminal project launched

February 24, 2008

Country’s leading provider of integrated multi-modal logistics solutions for bulk and containerized cargo and offshorfe logistics, Sical logistics on Sunday launched Nagpur Sical Gupta road terminal at Multi Modal International Hub Airport at Nagpur (MIHAN).

Union Minister for New and Renewable Energy, Vilas Muttemwar and State BJP President Nitin Gadkari laid the foundation stone of Rs 119.3 crore project. Chairman of Chennai-based Sical, Ashwin Muthiah and Chairman of Gupta Group of Industries, Padmesh Gupta were present on the occasion.

Speaking to reporters Muthiah and Gupta said a special purpose vehicle, Nagpur Sical Gupta Road Terminal (NSGRT), comprising Sical with 51 per cent stake, Maharashtra Airport Development Company 26 per cent and Gupta Coal with 23 per cent stake, will build, operate and manage the road terminal.

Sical MD and Group CEO, Sudhir Rangnekar said road terminal will stretch across 60 hectares of area and have parking facilities for 1150 vehicles including multi axle vehicles and cold storage. It would be completed by January 2009, he added.

NSGRT was formed in April 2007 and agreements were signed in August 2007. Rangekar said Sical was handling 22 mn tonnes of BUL and 5,00,000 teu (twenty euqal units) of containerized cargo.

Sical’s delivery network includes walk-in-berth at Chennai for ships carrying bulk cargo, a container terminal at Tuticorin.

Source: economictimes.indiatimes.com

Written by ITW Editor · Filed Under BOT, Construction, Infrastructure, Investment and Finance, Projects

NHAI awards 5 road projects contracts

February 24, 2008

It is reported that National Highway Authority of India has awarded 5 road projects worth INR 109.12 billion to private companies.

1. Larsen & Toubro, a highway widening project in southern India for INR 4.19 billion rupees

2. A JV company between Soma Enterprise and Isolux Corsan JV has won a road project in northern India for INR 27.5 billion

3. A JV company between IRB Infrastructure Developers and Deutsche Bank got the contract to widen a highway in western India for INR 16.94 billion

Mr Bhram Dutt secretary at transport ministry said that the projects are part of India’s INR 2.42 trillion national highway development programs.

India is seeking active private participation to build roads, airports and power plants as the government is unable to raise the funds needed to finance them on its own.

Source: steelguru.com

Written by ITW Editor · Filed Under BOT, Expressway, NHAI, Projects

Mumbai sea link banks on ultra-high traffic flows

February 23, 2008

Reliance Energy has quoted a concession period that has taken even MSRDC by surprise.

The Reliance Energy-led consortium’s ambitious bid, which helped it emerge the preferred bidder for the Rs 6,000-crore Mumbai Trans Harbour Link, has set a new performance benchmark in the infrastructure business.

The consortium has offered to build the 22-km six-lane bridge, which will connect Sewri and Nhava Sheva (see map), by 2013, recover the costs from revenues and hand it back to the nodal agency, the Maharashtra State Road Development Corporation (MSRDC), in just nine years and 11 months.

In technical parlance, this is known as the concession period.

To put this in context, the Mukesh Ambani-controlled Sea King Infrastructure, which was the only other bidder, quoted a concession period of 75 years.

Significantly, in 2004, MSRDC itself estimated a 35-year concession period for the sea link project. For the Mumbai-Pune expressway, the period was 30 years.

Indeed, Parvez Umrigar, managing director of Gammon, said his construction engineering company had decided to opt out of the sea link project because of the “frightening equation of risk and return”. Umrigar declined, however, to comment on the Reliance Energy bid.

So what made the Anil Ambani-controlled Reliance Energy quote a concession period that has taken even MSRDC by surprise?

Reliance Energy declined to comment on the issue.

In its 2004 study, the MSRDC had projected a traffic of 50,000 passenger car units (PCUs) a day when the bridge was completed.

But back-of-the-envelope calculations show just to break even, the Reliance Energy consortium would need a minimum of 1,09,589 PCUs a day paying an average toll of Rs150 for around 10 years.

A passenger car unit considers one truck as 2.5 passenger cars to calculate the overall traffic.

An industry expert said the operational cost for the project will be at least Rs 500 crore over 10 years.

Besides, the usual debt-equity ratio for such infrastructure projects is 70:30. Assuming a conservative 5 per cent interest rate on the debt, the interest cost for a 15-year loan would be around Rs 3,000 crore.

If the consortium wants just a 10 per cent return on its investment, the traffic requirement on the bridge would easily be around 250,000 PCUs a day — five times the MSRDC’s traffic estimate.

MSRDC, however, said the traffic demand has changed a lot since 2004 and the figure is expected to be much higher in 2013, when the bridge is operational.

“The construction of the special economic zones (SEZs) by Reliance and the new airport in New Mumbai will increase traffic demand hugely,” said Vijay Garva, chief engineer for the link at the MSRDC. He, however, did not give any fresh traffic estimates.

The MSRDC officials added that a lot of traffic on the Mumbai-Pune route would also be diverted to the bridge. The sea link will also ease pressure on the Mumbai-Pune Expressway, National Highway-4 and Mumbai-Goa Highway, where traffic is expected to increase.

The MSRDC is asking for a Rs130-crore performance guarantee to be kept with MSRDC so that the bidder sticks to the construction time schedule of five years.

Nitin Gadkare, state BJP president and former public works minister, said Reliance Energy is obviously banking heavily on the new airport at Panvel and the SEZ.

However, the calculations may go awry if any of these projects gets delayed, he said.

Gammon India, however, is not expecting an exponential rise in the traffic from south Mumbai to Nhava Sheva, which is the gateway to traffic from Mumbai to Goa and Pune. Besides, there is already a link bridge in Vashi connecting south Mumbai to New Mumbai.

Source: business-standard.com

Written by ITW Editor · Filed Under BOT, Maharashtra, Media, Projects, Reliance

NHAI awards projects worth Rs 109.12 bn

February 23, 2008

The National Highways Authority of India (Q, N,C,F)* (NHAI) awarded 5 projects, worth Rs 109.12 billion, of six-laning of highways under the National Highway Development Programme Phase-V (NHDP-V), reports Business Standard.

NHAI awarded projects to infrastructure developers, including Larsen & Toubro, Emirates Trading, IRB, Isolux Corsan, and Soma Enterprises among others. These 882 kilometres of sections for six-laning of highways are under the Golden Quadrilateral (GQ) and North-South Corridor. Under the NHDP-V, 6,500 km of existing four-laned national highways (NHs) have to converted into six-lane highways through a build-operate-transfer (BoT) basis. Of the total length, 5,700 km is on GQ and 800 km on other sections.

The five awarded projects include 43.4 km on the Chennai-Tada stretch on NH-5, 225.6 km on the Gurgaon-Kotputli-Jaipur stretch on NH-8, 239 km on the Surat-Dahisar stretch on NH-8, 291 km on the Panipat-Jalandhar stretch on NH-1.

These are the first batch of projects which have been awarded on a new model concession agreement (MCA) approved by the Committee of Infrastructure recently. The new agreement will work on revenue-sharing model where the private developers will share 17% – 48% of their toll-revenue with the NHAI within 180 days of signing the agreement. Under the old agreement, the NHAI projects were awarded on the bidding parameter of positive or negative grants.

Source: myiris.com

Written by ITW Editor · Filed Under BOT, Construction, Investment and Finance, NHAI, NHDP, Projects

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