Since May this year, the National Highways Authority of India (NHAI) has failed to award even a single highway development project. This is despite the authorities taking a decision to shift to the EPC (Engineering Procurement Contract) format for offering projects to developers, primarily to tide over the lacklustre response seen from private players to the other public-private partnership (PPP) formats that includes highway sections offered on the Build, Operate and Transfer (Toll) model.
This is the second consecutive year after 2012-13 when award of road projects has seen a dismal show. Last fiscal, awards had touched a low of 800 km.
“The slow pace of award is essentially because of the slowdown in the economy and we are finding it difficult to find takers for our projects, especially those offered on the PPP route. Projects on EPC are also not coming up for bid, as they are in various stages of the project design process,” said a senior NHAI official.
This slow pace of award is despite the fact that the EPC projects offered in April received interests from as many as 28 bidders per project. The developers also lowered project cost quotes by as much as 45 per cent than the NHAI’s benchmark cost. The highways authority had been able to award 475 km of road projects in April, of which 355 km of road projects were on EPC and the rest were awarded on Build, Operate and Transfer (Toll).
In an EPC project, the contractor has to quote the cost of constructing or upgrading the road section, which is completely funded by the government. Every project has an estimated project cost and the developer offering to complete the project at the lowest cost gets it. A BOT (Toll) project, on the other hand, is a form of PPP project where the developer builds the road and recovers his investment through toll to be collected over a concession period.
According to the plan for the current fiscal, NHAI has a target to award 2,000 km of road projects on EPC in the current fiscal and another 2,000 km on BOT (Toll), if market conditions support.
Meanwhile, NHAI’s attempts to convince the government to allow them to award projects on EPC, as they are not able to get bidders for projects on PPP, was shot down. “Award of projects on EPC would have given the cash-starved roads sector a fund booster to carry themselves forward. Any EPC project requires only 20 per cent of the total project cost in the first year and we have the money to fund it,” said the NHAI official.
He further explained that NHAI has around Rs 6,290 crore in its kitty and the money can be used to fund 3,000 km of road projects in the first year. “Cost of building 1 km of a four-lane road is around Rs 10.5 crore. We can easily fund around 3,000 km of four-lane road projects in the first year from the funds in our kitty,” the official added.
* The highways authority has so far been able to award 475 km of road projects, which were awarded in April
* This is the second consecutive year of dismal award of road projects after 2012-13, when awards touched a low of 800 km
* NHAI balmes the slow pace of award essentially to the slowdown in the economy