FE Editorial : Sub-prime highways

If it wasn’t bad enough that the NDA’s hugely successful roads programme had crawled to a halt under the UPA, the GMR Group walking out of the most successful roads bid in recent years has been a huge blow—indeed, the story of last year was one where the National Highways Authority of India (NHAI) had managed to pull off a coup with some outlandish bids. For 33 road projects, where NHAI staffers had estimated they would have to pay out R3,400 crore to bridge the gap between revenues and costs, the government managed to get bidders to agree to pay NHAI a total of R19,000 crore (on an NPV basis, using a 12% discount rate). Around half of this was from one project, a 4-lane national highway that was to be converted into a 6-lane one, from Kishangarh in Rajasthan via Udaipur to Ahmedabad in Gujarat. This is the project that, last Friday, GMR gave a notice to NHAI, saying it wished to terminate the project.

Interestingly, the government cleared the setting up of the Cabinet Committee on Investment (CCI) for precisely the reasons stated by GMR for walking out of the project. GMR’s big complaint is that NHAI was not able to get it the environment clearance for one of the tunnels that needed to be built along the highway. Apart from the fact that 6-laning an existing highway should be one of the easiest projects to clear, this is a project in

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