Govt to woo Chinese, Australian firms to build roads in India

November 8, 2013

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Move in the wake of domestic developers keeping away from bidding for road projects

With developers in India staying away from bidding for road projects, the Ministry of Road Transport & Highways plans to conduct road shows abroad to attract foreign firms to take up projects here.

According to sources, the road shows are expected to be conducted in China and Australia, among others, over the next few months.

A senior official in the ministry told Business Standard the ministry has prepared a presentation to be made to the Prime Minister shortly and “one of the proposals is to do road shows abroad to ask investors to participate in PPP (public-private partnership) projects in India”.A National Highways Authority of India (NHAI) official also confirmed that such a proposal is being studied.

The proposal comes at a time when many private road developers, including infrastructure majors GVK, GMR and Larsen & Toubro, have stopped investing in road projects owing to land acquisition problems and funding constraints, among other reasons. Some other developers have also walked out of road projects due to funding concerns.

With the general elections approaching and road construction turning out to be a crucial factor, reviving construction activity is a priority for the government. It has managed to award only less than 1,000 km so far this year.

Experts, however, say the government will need to sort out problems plaguing Indian companies before inviting foreign developers.

“The Indian road sector is at a crossroads and we need to take policy decisions to help Indian companies. Once the internal problems are sorted, will we be able to see some fruits from the decision to do road shows abroad,” said Vishwas Udgirkar, senior director at Deloitte India.

Private road developers in India have also been plagued by the quantum of premium that companies have to pay to NHAI. The firms have been asking the government to reschedule the payments so as to provide a breather for them. Private developers owe close to Rs 1.51 lakh crore to NHAI as premium over the next 20 years. The government has set up a panel under the Prime Minister’s Economic Advisory Council chairman C Rangarajan to decide the terms and conditions of the premium rescheduling.

Premium is the amount a concessionaire pays NHAI for a build-operate-transfer project, on the assumption the returns will be very high. This is usually decided on the basis of future traffic flow at the time of bidding.

Source-http://www.business-standard.com