Stalled road projects get policy push

October 28, 2014

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A journey of a thousand miles begins with a single step. Roads infrastructure is at murky stage with current logjams in projects. It is a tough road ahead for the newly-formed government as it has to put in place correct policies and reforms to ease the situation.Road sector is crucial for economic growth. Realizing this, the BJP-led government is giving priority to development of road transportation.Business leaders attribute the slack in this sector to lack of political will,which didn’t allow policies to take off in recent past.

The Indian road sector continues to face multiple challenges this financial year with high interest rates, sluggishness in awarding road contracts, reduced availability of funds, slowdown in execution, and increased competitive intensity.However, many projects awarded over the last one year are hanging ire because of delay in land acquisition, clearances, and financial closure.Expectations are fairly high from the Narendra Modi-led government, which won a clear majority in the elections. After a few days of becoming Prime Minister, he said, “A nation that gives impetus to infrastructure, be it roads, rail,airport, that is where chances of development increase. We have to take ownership to build a strong nation.” Business sentiments are improving and corrective actions are being taken to lift the sector from the prolonged sluggishness.

The public-private-partnership (PPP) model of awarding road projects has proved to be a complete failure in India, leading to a dip in road construction to a mere 3 km a day. Challenges are many – overall economic downturn, lack of equity in the market, difficulty in arranging debt, highly-leveraged balance sheets for highways developers and land acquisition, approval and clearance- related issues. Blaming the UPA regime for the present situation, Union Minister for Road Transport and Highways Nitin Gadkari said the previous government awarded projects without acquiring even 10 per cent of land, which resulted in delays and cost overruns. In a major policy shift, the NDA government has decided to implement projects on Engineering Procurement and Construction(EPC) mode.

At present, 437 projects, entailing an investment of around `21 lakh crore, are delayed due to various issues across infrastructure sector.

Around 260 road projects worth`60,000 crore are stuck, owing to clearances and approvals. All efforts are being made to club road transport and railway ministries for faster implementation of projects. Also in an important decision, the process of clearing road bridges has been simplified with online application. The NHAI would bear construction and maintenance costs of the projects. Some of the decisions are:

▪ MoEF to allow state governments to give permission for sand mining up to 20 hectare as against the existing norm of 5 hectare

▪ State government and regional office MoEF will be allowed to clear linear projects, involving forest land up to 40 hectare

▪ National Board of Wild Life approves projects, falling within 5-10 km radius of various sanctuaries

▪ Railways to standardize ROB & RUB designs & to put the mechanism online

The NHAI board has given in principle approval for creation of a body, Asset Reconstruction Company, which would try to make stalled and non-commercially viable projects feasible. Indian Banker’s Association has already given its consent as most of the roads are turning non- performing assets (NPA). The entity would have two options: Either to take over an entire project, according to the clause of the concession agreement, or complete a small portion of the delayed work. This is a welcome move as it will help improve the situation in the cash-starved sector. There are numerous disputes, involving arbitration cases amounting to `26,556 crore investments between developers and NHAI. The NHAI has so far settled `10,550-crore projects with concessionaires. At least 49 pending claims, involving 26 contractors, has been cleared.

For ending corruption, the Amendment in Motor Vehicle Act is proposed in next session of parliament. Some of these changes would be based on best practices of the world like e-governance. The RTOs would be linked to e-governance to bring transparency in the system, plagued by malpractices.

The government would have to work on a policy framework to assure at least 16 per cent internal rate of return for infrastructure projects. This would safeguard developers from foreign exchange fluctuations and boost investment in the sector.India has to soon embark on the next wave of economic growth, which will encompass some fundamental shifts in growth model as well as larger and bigger social reach to beneit its vast population. Being one of the fastest growing economies of the world requires physical infrastructure facilities to continue the pace of development process. The new government at the Centre has to build and expand its key infrastructure to global standards and road sector plays an important role in it.

Prerna Singh :,Sr.Analyst, Roads Infrastructure,Infraline Energy

Written by ITW Editor · Filed Under About, Articles

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