1. Surge in award of projects puts road construction in top gear

Surge in award of projects puts road construction in top gear

The pace of national highway construction, which has been slow for the last few years, is slowly gathering momentum.

By: | New Delhi | Updated: November 20, 2015 1:24 AM
The pace of national highway construction, which has been slow for the last few years, is slowly gathering momentum.

The pace of national highway construction, which has been slow for the last few years, is slowly gathering momentum.

The pace of national highway construction, which has been slow for the last few years, is slowly gathering momentum. The National Highways Authority of India (NHAI) and the ministry of road transport and highways have together got some 2,400 km of highways constructed during April-September this year compared with 1,800 km in the corresponding period last year.

With the recent surge in award of projects — NHAI itself awarded 3,067 km of highway projects in 2014-15 and its target for the current year is 5,000 km — and the considerable additional flexibilities being built into the public-private partnership (PPP) model, the government is confident of meeting the target of expanding the country’s road network by 30 km every day in the next few months, official sources told FE. The rate of road construction is currently some 13 km a day, up from around 2 km a day when the NDA government took over, the sources added.

NHAI, significantly, awarded 870 km of highways in the build, operate, transfer model in the first six months of the current fiscal, a sign of gradual improvement in the PPP segment. “The fact that 870 km roads have already been awarded through the BOT (toll) mode itself signifies that private sector is now coming back to the sector,” Rohit Kumar Singh, joint secretary (highways) in the ministry, told FE.

Of the highways constructed in the first half of this fiscal, 850 km was by NHAI and 1,550 km by the ministry. Among the awards, most are still engineering, procurement and construction (EPC) contracts given that investor approach to the PPP segment is still wary. But, the sources added, BOT projects and the newly devised hybrid annuity projects where the government bears 40% of the project cost and assumes most part of the revenue risk would also be looking up without soon.

The government has set a target of 6,300 km for construction and 10,000 km for project awarding for the current fiscal. Against 6,300 km highway construction target for the last fiscal, only about 4,400 km could actually be achieved.

Sources said road project awarding has more than doubled during the April-September period of the current fiscal at 4,500 km compared with 2,200 km during the same period of last fiscal. NHAI is more proactive on this front, awarding about 2,500 km during the period and the ministry, 2,000 km.

Apart from introducing the hybrid annuity model, the government has also eased the exit policy for developers, rescheduled the premium payable to the government and come out with a provision of a one-time fund infusion by NHAI to bail out the stalled projects. On Wednesday, the government announced compensatory tolling and annuity for under-construction BOT projects that are facing time and cost overruns not entirely due to the fault of the developers but also due to the delays in land acquisition and getting various clearances.

The ministry plans to award 2,000 km of road projects, mostly conceived by NHAI, through the PPP mode in the current fiscal.

Last year, about 8,000 km of road projects were awarded and of that, about 7,300 km was on the EPC model. Similarly, of the 10,000 km to be awarded this year, 7,000 km would be on the EPC model. The road ministry expects to award 12,000 km of road projects next year and build about 7,500 km of roads through the EPC mode.

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