The recent move by two major infrastructure players, GMR and GVK, to withdraw from large highway development projects has started a new debate on the stress that exists in the road sector. From delay in clearances, to aggressive bidding and problems in raising finances, issues in the sector are not too easy to handle. Virendra D Mhaiskar, CMD, IRB Infrastructure Developers spells out the challenges before the road segment and the IRB's plans in this environment in an interview with Shubhra Tandon and MG Arun. Excerpts:
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.