Target for highway projects halved

November 11, 2013

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Proposal to cut the target of contracting out 4,028km of highway projects to be placed at a review meeting today

Ragini Verma

The roads ministry awarded just 1,322km of road projects in 2012-13 against a target of 9,500km. Photo: Mint

New Delhi: India’s roads ministry has nearly halved its target of awarding highway projects to 2,128km in the year to March because developers are not showing interest in bidding for many of these. “There is no interest from the private sector and the slowdown is severe on the PPP (public-private partnership) projects front,” a ministry official said.

The proposal to scale down the target of contracting out 4,028km of highways projects will be placed at a review meeting on Monday that Prime Minister Manmohan Singh is expected to attend. This is the second lowering of the target that was set at 7,500km at the beginning of this fiscal year.

Road projects worth Rs.27,000 crore totalling 2,900km did not receive any bids between March last year and October, the official said, requesting anonymity. The ministry has so far in the current fiscal awarded just 123km of highway projects to be implemented in partnership with private firms against the target of 2,023km. “We do not expect to be able to award any more highway projects under the PPP mode,” the official said. “We will focus on meeting our target for awarding projects under the EPC mode.”

EPC stands for engineering, procurement and construction, under which the government pays a contractor a sum to build a project awarded through competitive bidding.

At the meeting with Singh, the ministry will also bring up the issue of the mandatory requirement of 90% land acquisition at the bid stage as slowing down the award process.

The ministry awarded just 1,322km of road projects in 2012-13 against a target of 9,500km. The sector has seen a slowdown due to the overall economic downturn, lack of equity in the market, cautious lending by banks and the highly leveraged balance sheets of developers.

“Developers are shying away mostly because they do not have liquidity right now. The government has little option but to carry on with EPC projects,” said Abhaya Agarwal, a partner at EY Llp who oversees the infrastructure practice at the consultancy. “When the market becomes more balanced, I think the government should look to focus on the annuity model. The government should also be sympathetic to the problem of cost overruns on account of land acquisition and environment clearances and do more to address these issues.”

Although the government has announced a series of measures such as delinking environment and forest clearances, relaxing the exit policy for developers and the lending norms for road projects, it has failed to revive the sector.

The review on Monday will also focus on an update on expressway projects that have been put on a fast track by a steering group of civil servants constituted by Singh in July.

The ministry on 1 September invited requests for qualifications for two such projects—the Eastern Peripheral expressway and the Delhi-Meerut expressway. It will invite similar requests from developers for the Mumbai-Vadodra expressway by mid-December and for the Delhi-Jaipur expressway in January. These highways involve a total project cost of nearly Rs.30,000 crore. The steering group had asked the ministry to award the eastern peripheral expressway by 31 December, the Mumbai-Vadodara expressway by 1 March and the Delhi-Meerut expressway by 15 March. “Certain project-specific issues that could delay the projects will be taken up with the Prime Minister at the meeting so those can be resolved,” said another government official, who also declined to be named.

Source-http://www.livemint.com