PMO likely to approve special package for roads

Feb 18 2013, 08:42 IST
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Summary* ‘For projects awarded at a premium, amounts may be reduced’

The troubled roads sector can expect a relief package from the Prime Minister’s Office (PMO), which has called a meeting of the road transport ministry and the National Highways Authority of India (NHAI) on Monday.

Government sources say that the meeting is likely to discuss the bottlenecks that have led to a slowdown in road projects and may work out an interim relief to projects that were awarded on premium to make them viable.

“A large number of projects, awarded on premium in the last fiscal, may have become unviable for companies due to rising input costs and high cost of borrowings. For such projects, premium amount may be reduced for the initial few years providing them some relief. But the total amount of premium, as committed by these projects, will be same,” said a government official.

Quoting at a premium amounts to committing an annual payment to the government over a period of time that is the concession period. Companies bid a premium if they are confident the toll revenue accruing to them would more than offset their costs.

Officials of NHAI and the road transport ministry feel that the revival of the sector will happen only after the government gives some kind of a relief to the sector.

NHAI, which awarded a record 6,700 km of road projects in 2011-12, also awarded a record 31 out of 51 projects at a premium. The highways authority is also to earn around Rs 3,000 crore annually through premium payments, which would grow at a rate of 5 per cent per annum.

However, the weak economic scenario, increase in input costs and delay in approvals have led to two large road developers — GMR Infrastructure and GVK Infrastructure — sending termination notices to the highways authority.

Meanwhile, the meeting is also likely to discuss the dismal pace of project awards and look at ways to revive it.

Both NHAI and the road transport ministry have together been able to award only 1,600 km of road projects as compared to a target of 9,600 km set by the PMO that was revised downwards to 8,800 km.

The road transport ministry’s plan to award 4,000 km of road projects on Engineering Procurement and Contract basis is also unlikely to happen due to delay in approvals.

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