Operators cock a snook at toll rules

December 24, 2012

The Ministry of Road Transport and Highways (MoRTH) has finally woken up to the gross violation of the toll agreements with concessionaires, who are collecting road tax on 17 major “under-construction” highways in violation of rules.

The amended notification of 2009 bars toll collection on incomplete highways. The flouting of rules came to notice from projects like Gurgaon-Kotputli-Jaipur, Delhi-Agra, Varanasi-Aurangabad and the Pune-Satara national highways.

Ironically, the violation of the Central Government’s notification is taking place under the garb of “technicality”. While the Government rules specifically mention that no toll can be imposed on the under-construction road projects, developers have started collecting toll. At present, there are 212 toll collection centres across the country under the National Highways Authority of India’s (NHAI) various projects based on PPP, BOT or OMT model. “The collection of fee levied shall commence within 45 days from the date of completion of the section of national highway, permanent bridge, bypass or tunnel, as the case may be, constructed through a public-funded project,” says the Review (Report) of the Toll Policy of National Highways in May 2009.

The Government has notified the National Highways Fee according to the National Highways Fee (determination of Rates and Collection) Rules 2008, and the rules are amended periodically. In 2009, it was amended keeping in mind widespread protest by road users and misuse by the concessionaries of BOT or PPP. A well-placed source said that the Ministry has asked the road making agency to review the contract agreement between the NHAI and concessionaries on the 17 stretches where toll is being charged.

However, a Ministry official justified the road tax on six-lane under-construction projects with the argument that toll was collected when these roads were just four-lane ones. However, citing the 2009 amendment, another official contested the argument citing the amended notification.
There are 111 public-funded road projects which collect toll. There are 102 State-wise stretches on which tax is levied. These include the 312-km Durg Bypass on NH-6 where toll is being collected by M/s Shakti Kumar M Sancheti Limited since December 2000. On some roads like the 72-km Badarpur-Kosi on NH-2, toll is being collected since June 2002. The Ministry also received complaints of overcharging by toll operators on NH-5 in Andhra Pradesh at Laxmipuram and Sunnambatti Toll Plaza. The concessionaire was penalised to the tune of `3.6 crore in total and contracts terminated. A penalty of `1.48 crore was levied o Vantada Toll Plaza in Gujarat. The matter is sub-judice.

source: http://www.dailypioneer.com

Written by ITW Editor · Filed Under MORTH

Vinayak Chatterjee: The high road to efficiency

January 16, 2012

For a historically capital-starved and infra-deficient nation, we have rightfully been obsessed with asset creation in the public-utility space. Little emphasis has been paid, however, on the maintenance of these assets or the delivery of pre-determined service levels from these assets. Take, for example, our roads and highways. Highway users continue to be a frustrated lot in spite of massive investments in this sector. Waiting-time at toll-plazas, safety aspects, ride quality and haphazard lane-management continue to bedevil even newly constructed roads.

Highway operators must eventually get prepared for regulatory raps as well as individual and “class action” litigation for failing to provide desired levels of service. They will have to wake up to the reality that toll cannot be charged merely for the privilege of being allowed to use a particular stretch of road. The “purchase consideration” inherent in charging a toll has to come bundled with the commitment of a smooth ride at a designated average speed, with full consideration of safety and highway amenities. Failure to ensure this should attract penalties and damages.

In this cauldron of frustrations and rising aspirations, it is interesting to note that the responsibility for operations, maintenance and tolling (OMT) is gradually shifting from the developer or the contractor group to independent and professional OMT service providers. Simultaneously, the focus is also shifting from merely reducing capital expenditure to optimising life-cycle cost, as well as, providing an accountable delivery of services.

My friend and colleague, Vivek Rastogi, who has a deep knowledge and insight on these issues, likes to draw out lessons from Brazil’s experience.

Brazil, with emerging-economy demographics much like India, has faced similar challenges in highway operations. Brazil embarked on its public-private partnership (PPP) highway development programme a decade ago. Its journey in developing national highways on a build-operate-transfer (BOT) basis has been equally successful. The operations and management (O&M) for these highways started the same way as where India is today — a toll revenue leakage as high as 25 per cent, below par patrolling and unsatisfactory maintenance and traffic management.

What is remarkable is that in the last 10 years Brazil has improved the O&M performance to reach close to world standards. There are four main reasons for this success:

An independent governance and regulatory body: the Brazilian Agency for Land Transportation (ANTT) was set up in 2001 to monitor the performance of concessionaires. ANTT sets aggressive service-delivery standards. These include mandatory electronic tolling, patrolling every 90 minutes, fixing pot-holes in 24 hours and replacing damaged safety signals in three days. It has a monthly monitoring mechanism for each concession. Any major gaps in performance are severely penalised.
Electronic tolling accounts for 60 per cent of the collections. This has significantly improved the productivity for heavy transport vehicles and also resulted in more accurate toll collection.
There is a strong and time-bound legal support for issues affecting the concessionaire. Users paying toll are answerable to the legal system and these cases are closed within 30 days. Major accidents and erring drivers are also referred to the same legal set-up. This level of processing is possible since the legal set-up directly reports to ANTT.
The police is extremely responsive and officers are actually stationed in the control rooms of the concessionaire. This support from the police has helped the concessionaires in reducing revenue leakage to near-zero levels.In essence, Brazil has created a virtuous circle in which concessionaires have near-100 per cent toll collection and thereby have adequate funds and motivation for O&M. They have strong legal and police support to ensure this is an ongoing process. In case they do not deploy adequate funds or do not perform activities in a timely fashion, the regulator ANTT has the stick ready. The same is the case in other developed countries with large PPP highway development programmes — such as Portugal, Spain and Malaysia.In contrast, India has a vicious circle – one that reduces the value and impact of the new asset – and this, unfortunately, starts from the design and construction phase.
Sarkari authorities often “under-design” to reduce project costs and sometimes to save “viability-gap” funding. The under-provisioning of service-lanes, under-passes and pedestrian facilities are simply obstinacy to recognise genuine consumer needs. The state also often abdicates its role in removing encroachments and ensuring hassle-free right of way. Many Indian concessionaires have their roots in the construction business. They enter BOT highway projects for the construction revenue and not for operating a long-term asset. As a result, profit maximisation during construction is often in conflict with the desired asset lifecycle longevity. The concessionaire has little legal or police or state support to make all users pay. This is one of the reasons 20-30 per cent leakage in toll collection is not uncommon.

These three aspects – poor design parameters, short-sighted development and collection difficulties – together create a financial pressure on the concessionaire. This is the start of the slippery slope — a story with which we all are very familiar across most Indian roads. The resultant poor O&M of roads leads to more headaches and accidents.

Similar to ANTT of Brazil, the National Highway Authority of India (NHAI) is currently performing the role of setting O&M requirements in the concession agreements and monitoring implementation. The NHAI role in follow-up and corrective action often lags intent, leading to the known “chalta-hai” attitude.

Is there hope for the Indian highways? Yes. There are well known, implementable solutions. However, most of these are systemic solutions requiring states and NHAI to play a bigger coordinated role:
NHAI needs to be strengthened for O&M supervision and related penal action. The authority should go to the extent of displaying the service levels on the road and invite comments from users of the highway. In case of continued low service levels, either the toll rate could be reduced or NHAI should appoint a third party to manage the O&M of the highway.
State governments need to find an effective mechanism for providing better police support.
A separate legal tribunal for highway-related cases should be considered.
NHAI and the Ministry of Road Transport and Highways need to ensure the implementation of electronic tolling systems that will not only improve throughput, but also lead to more accurate toll collection.
The bureaucracy will have to get used to a widely different nature of contracting. From the centuries old, lowest capital cost tender system, the bureaucracy will have to define service-level agreements and choose parties that will deliver agreed levels of service at “minimum” cost to the citizen.With
all these in place, the romance of a long-road journey can surely be brought back. All we need is 21st century attitudes, technologies and systems in place.

Source: business-standard.com

Written by ITW Editor · Filed Under Uncategorized

NHAI to seek bids for 4,000 km highways in the next fiscal year

October 18, 2011

New Delhi: The National Highways Authority of India (NHAI) will seek bids for 3,000-4,000 km of highways for operations, maintenance and tolling (OMT) contracts in the next fiscal year, said J.N. Singh, member (finance), NHAI.

This will be in addition to the 2,900 km the authority has already put on the block since August this year. Under OMT contracts, private contractors are allowed to collect tolls on the highways they maintain. These contracts are typically for a concession period of four to nine years. Contractors share a part of the revenue with NHAI as concession fee, which grows 10% annually.

At least 80 companies have participated in bids this year, according to Ernst and Young. These include Relcon Infraprojects Ltd, IRB Infrastructure Developers Ltd, Oriental Structural Engineers Pvt. Ltd, Gayatri Projects Ltd and HDPL Infrastructure Ltd, according to the consultancy’s data.

“The highways in question are those that were laid in the 1990s on a build-operate-transfer (BOT) basis, and whose concession periods have ended,” said M. Murali, director general, National Highways Builders Federation (NHBF), an industry lobby. Under BOT financing, a private developer finances, builds the road and maintains it for a specified period in exchange for rights to levy tolls.

Murali, however, said NHAI is unlikely to seek bids for 3,000-4,000 km to private contractors. “The figure should be in the range of 2,000 km, as that is the road length that is going off concession next year.” NHAI simplified the bidding process this year by allowing companies to submit documents just once in a calender year, instead of asking them to submit these separately for each project.

Mint reported on 2 February 2009 that private developers could be allowed to maintain NHAI’s highways.

When B.C. Khanduri was highways minister (from 2000-2003), the authority had engaged ex-servicemen as toll collection agents on stretches maintained by the agency.

NHAI’s Singh said discrepancies in revenue collection had occurred over time.

By offering contracts for bids, the government will get a fixed income from private contractors, said Murali of NHBF.

“The profit or loss, as the case may be, would be borne by the contractor,” he said.

Abhaya Agarwal, executive director, Ernst and Young, said awarding maintenance contracts to private contractors is beneficial for NHAI as it typically leads to timely execution of projects.

Agarwal said the process enhances private participation in the sector, thereby increasing competitiveness as bidders either seek a lower grant or offer a higher concession fee.

Source: livemint.com

Written by ITW Editor · Filed Under Uncategorized