India’s highway-building programme is in crisis. This is partly due to its very ambitious scale, which means that public funds are not adequate to meet the programme’s demand for capital, given the swiftness with which roadsneed to be rolled out. There are other reasons as well. The crisis is also caused by the government’s inability to design auctions that eliminate unrealistic bids and delays that, in some cases, are a direct outcome of tardy clearances and regulatory hassles. The road sector’s problems have also arisen because the government’s private sector partners failed to take into account the effect a growth slowdown would have on their revenue, or were too ambitious in their forecasts. Thanks to a combination of these factors, not even a single build-operate-transfer (BOT) project was awarded in the first six months of the ongoing financial year, indicating the degree to which the private sector has soured on road-building. Basically, nobody wants to touch it.

In October, the government set up a panel under the chairman of the Prime Minister’s Economic Advisory Council, C Rangarajan, to figure out if there was a way out of this conundrum. The panel had some difficult decisions to take. In particular, many existing highway concessionaires wanted to defer the premiums that were due to the National Highways Authority of India, or NHAI, under the BOT system. The premium, which can range from Rs 3 crore to Rs 680 crore a year, is to be paid out over 20 to 25 years, increasing by five per cent every year. The total premium due over the next few decades is Rs 1.5 lakh crore. But the fact that revenues have not matched estimations means that many companies are grumbling about having to pay out. The government, meanwhile, alert for once to the concern that the private sector is trying to feather its own nest at the expense of the public exchequer, may reportedly want to cut off the payment of dividends by road-building companies – usually special purpose vehicles, or SPVs – to their parent company as long as premiums to the NHAI are still outstanding. Another possibility that the Rangarajan panel is considering is reducing the upfront payment of premiums for the next few years by a fixed proportion – 75 per cent, in fact. The NHAI has already argued for a low discount rate and against penalties for private developers.

It is certainly true that the private sector must stay involved in road-building in India. The government cannot pay for everything. And something must be done to enable stalled projects to move forward. However, an arbitrary and opaque mechanism is a very bad idea; nor should the private sector be allowed to dictate terms. The government must take account of the fact that just giving into demands for renegotiation sets up a severe moral hazard problem, and that it also renders past auctions unfair and future auctions problematic. Thus, two criteria should be front and centre in the final decisions taken by the government. First, the mechanism for dispute settlement should be transparent, consistent and independent. Second, it should not unduly benefit the private sector. In fact, there should be clear penalties – regardless of the request from the NHAI – for anyone who has delayed a project. This should include the government, since in some cases private developers have suffered because the government has sat on clearances for five years. Transparency and financial accountability are essential to clean up India’s vital roads sector.

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

Govt not to award BOT projects to pvt firms this year

Transport is at the heart of urban development and economic activity. However, the current urban transport paradigms, which favor auto-mobility and generate multiple social, economic and environmental impacts, are not sustainable. It is well-documented that in India, close to 1.5 lakh people die every year due to road traffic accidents and a majority of them are pedestrians and cyclists. About 6 lakh premature deaths take place in the country annually on account of air pollution and about 4 lakh people die every year due to physical inactivity, which is directly linked to a sedentary lifestyle. Apart from these, there are issues around climate change, energy security (dependency of importing fossil fuel) and others, all of which are directly linked to the way we plan our cities for habitation. That in turn is directly linked to the transportation system of our cities and towns.One on the easiest but counterproductive ways of solving the transportation problem is by expanding road capacity, i.e. road widening, constructing flyovers, etc. However, globally, it has been recognized that this is not the solution to traffic congestion because it encourages motorized movement in the city, leading to more congestion. In California, between 1973 and 1990, every 10% increase in road lane-kilometres led to a 9% increase in vehicle kilometres travel (VKT) within a four-year period. Usually, it’s a matter of time before newly improved roads become congested again, a phenomenon known as “the rebound effect”.

Numerous empirical studies and analyses of real world case studies have shown that new road capacity usually induces traffic in direct proportion to the amount of new road space. In fact, different studies have shown that a large portion (50-100%) of the new roadway capacity is absorbed by induced traffic after three years of operation. Therefore, solving transportation problem by expanding road capacity is like solving an obesity problem by stitching bigger clothes or solving a heart problem with repeated bypass surgeries.

The answer to these problems lies in our own policies. India’s National Urban Transport Policy (NUTP) recognizes this and recommends that the focus be on moving people, not vehicles. It calls for promoted investment in public transit and non-motorized transport. One way to effectively achieve the NUTP goals is with the Avoid-Shift-Improve (ASI) framework:

Avoid or reduce growth in unnecessary travel while maintaining or enhancing economic and social opportunities for interaction through better land-use planning

Prevent the shift of trips from non-motorized transport and public transport to individual motorized modes

Improve the operations, energy and carbon efficiency of each mode

A comparison of Los Angeles and Stockholm shows sharp differences in the way people move and its impact on fatalities and health. In Stockholm, vehicle kilometers travelled are less than half while walking and cycling trips are almost seven times higher than in Los Angeles. Furthermore, Stockholm experiences one-sixth the pedestrian fatalities and one-tenth the pollution on a given workday.

Most cities in India are at an initial stage of development with a growing regional economy. They have a great opportunity to integrate their transport systems and land-use in a manner consistent with the ASI principles. If implemented, they will not need major and much more expensive changes later on, as is the case with industrialized nations. There is also a need to sensitize people and policy-makers around sustainable transportation and any development is this regard, like the recently launched Raahgiri Day movement in Gurgaon, will contribute significantly in making our cities more livable.

The writer is head of urban transport, EMBARQ India

The road ministry is on target to set up a road regulator before the next Parliament session is over. In an interview with Manu Balachandran, Oscar Fernandes, Union minister for road, transport and highways, talks about funding and other issues affecting the sector and the means to tackle them. Edited excerpts:

The prime minister on Monday reviewed the progress in the sector. Are all the projects on track?

We have reviewed the progress of projects and are on track as far as the number of projects are concerned. We are adding 17 km a day and that was the original target set by the ministry. The main concern is we are not finding bidders for new projects. Recently, when we invited bids for a number of projects, we were disappointed to find (that there were) no takers.

Private players have raised concerns about their participation in the road sector. How are you looking to address them?

First, there were some concerns about premium rescheduling. The finance ministry has set up a committee under C Rangarajan to decide on the premium to be paid and the terms and conditions for rescheduling. We will wait for its recommendation and then take a final decision. The government has also relaxed the exit norms for developers in road projects. The National Highway Authority of India (NHAI) has also been very actively acquiring land, since banks do not fund projects to private sector if 90 per cent of the land is not acquired. We have speeded up acquisition and this year we have achieved double of what we had acquired last year.

The Northeast is strategically important to the country. But, developers and officials say projects there do not take off due to lack of security.

That isn’t true. We have an accelerated programme and I have been personally visiting the states to assess the pace of projects. On Sunday, I was in Tripura to evaluate a project. But the main problem is funding.

Banks are not willing to lend to projects, but the roads ministry and NHAI have been doing whatever we could to provide that. There is a plan to go abroad and showcase development prospects in India’s road sector. But, even if overseas companies are willing to invest, we have to ensure that land is acquired and various clearances are received. So, at this point, we are trying to ensure that the ingredients are in place. We will ensure that land acquisition and environmental clearance for projects are on track to make the sector lucrative.

Are we likely to see a road regulator in place this year? There are also talks about a proposed policy on auto recall after the General Motors incident?

With regard to the road regulator, we have a draft bill ready and are keen on passing it during the coming Parliament session itself. Road projects are often spread over a 20-25-year period and there might be various concerns that might be raised during the period. The regulator will essentially look at pre- and post-construction work and will look into areas such as contract dispute resolution. As far as vehicle recall is concerned, I do not think there is a need for any policy. Vehicle companies should take the effort to inspect the product and ensure quality before marketing the product. But that is the responsibility of the company and the government should not be party to that.

When can we expect a decision on Quadricycles?

A technical committee is currently studying all the concerns that were raised from various quarters. We can take a decision only after they come out with a report.