The Union government is looking to set up an infrastructure trust fund, similar to real estate investment trusts in countries such as Singapore, by November to spur investments in the infrastructure sector.

 

 

The last three years have been remarkable for Indian road infrastructure: projects of 15,000 km were awarded during 2010-13. Yet, there is a huge task ahead. A decade ago, the bulk of the programme was done via the public funding route, today, 90% of highway development is undertaken via public-private partnership (PPP): on a design, build, finance and operate basis, where the private sector is involved in the entire project life cycle and shares commercial risks.

 

Surprisingly, many bids received did not ask for viability-gap funding and, instead, went for a hefty premium. While such flamboyant bids were a recognition of the unforeseen and untapped multiplier and induction effects of highways networking, they underlined the importance of private funding and effective implementation of contracts.

 

Some of the most strategically important cities of India are being connected now: for instance, Ahmedabad-Vadodara and Kishangarh-Udaipur-Ahmedabad would connect with Delhi-Jaipur-Ajmer-Kishangarh-Mumbai-Surat-Vadodara to complete the Delhi-Mumbai corridor. Similarly, Gwalior-Shivpuri and Shivpuri-Dewas would fill critical links for another alternate corridor connecting Delhi and Mumbai via commercial Indore. Similarly, Amravati-Jalgaon-Dhule would help connect Hazira port in Gujarat to Paradip port in Odisha and eventually mirror the East-West corridor along India’s economic hinterland of Gujarat and Maharashtra all the way to Kolkata.

 

But when the economy hits a speed breaker, the projected network externalities appear exaggerated and committed financiers pull back. When a single project languishes, it has a domino effect on all others whose viability suddenly becomes suspect. In normal times, there are challenges of financing because of an asset-liability mismatch and exhaustion of exposure limits of banks. Today, highway development requires stronger commitment to tide over wavering macro fundamentals. Besides, there are many roads of low-commercial viability in economically-backward areas that can only be undertaken through public funding.

 

But the most critical challenge today is on the implementation side. The National Highways Authority of India is overloaded and focused largely on award of projects. Contract management and oversight to ensure quality construction, maintenance and completion has taken a backseat under the PPP model. The private sector faces a dearth of managerial resources that can competently handle complex issues involved in coordinating with a multiplicity of governmental and local agencies.

 

While PPP models are useful to support fiscal constraints, they are not perfect panaceas. The government cannot afford to depend on the efficiency of the PPP developer. The former needs to nudge, cajole and guide the concessionaire and work with him to make him fulfil his commitment without compromising on standards, quality and timeliness. The regulatory capture of the independent engineer is a reality that cannot be ignored and discounted.

 

Further, the involvement of state governments has been missing despite their key role in facilitating acquisition of land, shifting of utilities and providing security and encroachment-free passage for uninterrupted right of way. States, along with their city governments, need to build their own connectivity corridors and spruce up main district roads and municipal roads by adopting innovative methodologies that leverage land and development rights. States should establish Road Development Corporations and vest them with adequate authority and resources. Having the chief minister as the chairman and the chief secretary as the vice-chairman, a model adopted in Madhya Pradesh in early 2004, will ensure highway development gets strategic support.

 

The challenge is speedy award of remaining highways and effective implementation of already awarded ones. Development of high-speed corridors between important urban centres and specialised connectivity projects is the need of the hour. It is not enough just to have a highway that connects two important points.

 

When commercial competitiveness is defined by the speed and reduced cost of transaction, it is imperative to have safe access-controlled travel and effective last-mile connectivity.

(The writer is an IAS officer. Views are personal)

Source-http://articles.economictimes.indiatimes.com

 

 

New Delhi, September 15 (IANS): Frustrated by several jammed highway projects, plans are afoot to re-negotiate contracts worth Rs 99,000 crore ($15.2 billion) with some of the private players in a bid to give them payment concessions, instead of imposing penalties.

According to official sources, a grand rescue plan, billed as a one-time measure, is in the final stages of government approval and involves 23 concessionnaires (the private parties) and a total project cost of Rs.34,000 crore ($5.2 billion).

Finance Minister P. Chidambaram and Road Transport and Highways Minister Oscar Fernandes have okayed a moratorium of 6-10 years on the premia due from them. Law Minister Kapil Sibal has been asked to reconfirm if this plan is legally and constitutionally tenable.

This, even after a senior official in the office of the Comptroller and Auditor General found fault with the proposal and aired the opinion on the relevant file.
Earlier, Sibal had noted that the rescue plan only has financial implications and it was the finance ministry’s opinion, and not his, that was required. In the process, even he had overturned the opinion of a joint secretary in his ministry.

The law officer had said renegotiation was “neither desirable nor permitted at (such) a belated stage… (and was likely to) open a pandora’s box among equally-situated persons having contracts with the NHAI (National Highways Authority of India)”.

The authority is the intended beneficiary of Rs.99,000 crore, as the money is expected to be used by it to build roads elsewhere in the country, mainly as a social obligation.
Sibal’s reconfirmation and the subsequent approval of the Cabinet Committee on Economic affairs presided over by Prime Minister Manmohan Singh will not only defer the payments by 6-10 years but also allow a major discount on the annul premia.

The National Highways Builders Federation, in fact, wants a sweeter deal.
Among the 23 concessionnaires, tasked to build 3,450 km of highways, GMR group was the first to throw its hands up on the 6-laning of a 555-km highway costing Rs.5,387 crore from Kishangarh to Udaipur in Rajasthan and further to Ahmedabad in Gujarat.

The company has a legal liability to pay government-owned highways authority an annual premium of Rs.636 crore. But the nodal ministry has found, instead, that GMR’s annual proceeds from charging toll already exceeds Rs.715 crore. Out of 23 select concessionnaires, some no doubt are in distress. The more fortunately placed are also happy to join the chorus of economic downturn and claims of incapacity to raise the requisite debt or equity. The highways authority has backed this reopening of contracts citing national interest.

Source-http://www.morungexpress.com/

 

 The Centre’s ambitious plan to kick-start development of critical infrastructure, including roads, during an election year has hit a barrier with the National Highways Authority of India (NHAI) deciding to scrap six projects worth Rs 4,000 crore due to land acquisition hurdles.NHAI is mandated to acquire land to develop national highways. It has so far scrapped four projects in Goa and Kerala and has now decided to let go off two more this year in Kerala, said a senior NHAI official. The projects could have added more than 420 km to the highway network. NHAI was looking to widen the national highways running through these states.

 

NEW DELHI, : The National Highways Authority of India (NHAI) has asked the Highways Ministry to deal with developers in a way that project contracts are cancelled amicably and insulated from future claims.

Source-http://www.thehindubusinessline.com

By YASHODHARA DASGUPTA, ET Bureau

  

NEW DELHI: To revive India’s stuttering highway building efforts, the government may scrap several existing contracts that are making little progress on the ground. The road transport and highway ministry has asked the National Highways Authority of India to review all languishing projects and identify those that can be terminated on contractual grounds, so that they can be bid for all over again.The move comes in light of the fact that several projects awarded in recent years are either stranded midway or have been complete non-starters. The road ministry also wants the same clarity for those stalled projects that could benefit from deferral of premium payments.

It will re-circulate a Cabinet note on its proposal to allow financially stressed developers to defer payments of premia that they had committed to pay to win the highway projects. An additional option of cancelling the projects and re-bidding them would now be included in the note.

Road ministry officials said this note, which has been modified based on the finance minister P Chidambaram’s advice on the matter, will be sent to the Cabinet so that a final call can be taken at the highest level and the projects can finally start moving again.

“A clear decision needs to taken. We have asked NHAI to find out how many projects can be terminated. The decision on what to do for projects that fall under the premium restructuring case will be taken at the Cabinet level. But for the rest, we can decide on a course of action now,” said a senior road ministry official familiar with the issue, adding that NHAI has also been asked to determine which of the premium-based highway development project are indeed stressed and thus, deserve a bailout.

“We are studying around 35 highway projects of which 23 are premium-based (with premium of close to 1 lakh crore) and the rest are based on viability grant funding. We will basically divide the projects into four categories – projects where developers are ready to operate under the original parameters as long as we fulfill all our obligations, projects that should be terminated with penalty where the concessionaire has defaulted, projects which should be terminated without penalty where both the concessionaire and NHAI have failed to meet obligations, and those where developers are sitting on the fence and awaiting more clarity from the policy end,” said an NHAI official adding that the NHAI board will deliberate on this list in this in their upcoming board meeting on August 22.

The highway authority is reviewing whether these 35 contracts can be terminated either for developer default, NHAI default or both and the NHAI board will deliberate on this in their meeting later this week, the official said.

NHAI has been batting for the premium restructuring proposal that would allow developers in stalled projects to restructure their premium payment so that the financial stress is relieved. However, in May, the law ministry rejected it on grounds of legal and constitutional feasibility following which the road ministry referred the matter to the Committee of Secretaries (CoS) who did not support the proposal citing the law ministry’s objection. In July, after a fresh request from the road ministry, the law ministry backtracked on their previous advice and instead said the matter should be resolved between the finance and road ministries.

Earlier this month, the FM wrote to road minister Oscar Fernandes cautioning him of the ‘moral hazard’ in renegotiating contracts post-award and that the law ministry’s permission must be taken.

 

Source-http://economictimes.indiatimes.com