We have seen two recent incidents of large road projects coming under stress. How big a blow does it deal to infrastructure investments in the country
In the last year or two, we have certainly seen aggression in bidding that has had its own impact. It's not that things have changed very dramatically over the last two months. I am not aware of a single project where all the clearances which NHAI (the National Highway Authority of India) was supposed to give, have come in real good time. Now, what is happening is that these (the NHAI projects by GMR, GVK) being large projects, the cost escalation impact is to the developers' credit. Any inordinate delay is going to take his cost up and then certainly, banks have become more jittery. So, naturally, if the clearances have not come through in a reasonable time frame, people do not want to stay with it.
In this case, the viability of those projects was said to be an issue...
I do not want to comment on any specific companies. If the bids have been quite aggressive and competitive, and then there is a delay which is quite substantial, then naturally, the viability becomes an issue. We cannot put complete blame on one side or the other.
What has been your experience with similar projects
The projects that we have been involved in are moving as per schedule. We do face challenges on it, but so far, we have been able to carry on quite well. In fact, we faced some delays on the Ahmedabad-Baroda project, which we just started on January 1, but we have pulled on with it now.
Is there a formula on how development of national highways should be treated
I think there is nothing wrong with the PPP (public-private partnership) model. As in any other partnerships, both sides have to understand the importance of timelines that one needs to keep. I don't think there is a new wheel to be invented here. Clearances need to come in a time-bound manner.
Will these incidents quicken the move to streamline discrepancies in the sector
The ministry of environment and forests has already clarified on the permissions required to cut trees for linear projects. I don't think there is complacency, I think there is an attempt from all sides in the government to resolve these issues and move on it. By the way, there are projects that are starting in time too. Ahmedabad-Baroda project is also a R4,000-crore large project, which has started. It is true that we need substantial amount of equity to come into roads, for which we need to have a conducive atmosphere, which is hardly there.
What do you have to say on the toll policy
There is an attempt being made to have more robust systems of toll collection through means like electronic systems. But if we start saying that we do not want to pay toll, then we have a larger issue at hand.
What do you feel about linking real estate to the road development
I think it is not a good idea. If the funding of the road project per say is a challenge, adding a component of real estate to it, which will then add as a revenue realiser to fund this road is further more difficult. Where are we going to get additional resources to buy the land or to develop it
How challenging is the funding environment
The debt cost is definitely high. Of late, banks have become quite critical of funding these projects, since they are not comfortable with the balance sheet of companies. So, it is more of a blame on us developers, because maybe our balance sheets are not in a situation where we can go to the banks to seek more money.
How do you think the aversion of banks to road sector will get resolved
Banks have never said 'no' to a project if it is viable and you have the money to put in equity. There have been cases where banks' assessments have gone wrong and there again, it is for us developers take the blame.
Do you think there would be some learnings coming in from here
Our industry is such that we do not learn from the past mistakes. The frenzy continues. Another bout of projects and we will see more aggression coming back.
Can you provide an update on your road projects
Our Ahmedabad-Baroda project is so far our largest project. Work on it has started now and the capitalised cost of the project is R4,800 crore. It would be funded with R1,500 crore of equity and the remaining, debt. This is six-laning of the existing NH8 between Ahmedabad and Baroda, to be done in three years' time. And we offered a premium of R 309 crore to the government in the first year, which will go up by 5%. In addition, we will continue to bid for future viable projects.