Centre modifying allocation method for highway projects

Written by Timsy Jaipuria | New Delhi | Updated: Aug 19 2014, 06:17am hrs
In a bid to fast-track award of highway projects, and thereby construction, the government is redesigning the way projects are allocated based on assessment of their viability.

According to sources, projects would now be bid out in three ways: in cases where no viability gap funding (VGF) is seen to be required, the build-operate-transfer (BOT) toll model will be adopted. As regards projects which are likely to be viable with the support of VGF of up to 20%, the NHAI will formulate both the BOT (toll) and the EPC models and leave it to the road ministry to take a final call on which way to go. In the third category of projects which are not going to work on the BOT (toll) model with VGF up to 20%, the EPC model would straightway be followed.

While the focus has largely shifted to the EPC model due to lukewarm response to PPP projects, the NHAI has so far this year awarded seven highway projects with total length of 798 km. The authority is in the process of inviting bids for another 394 km of projects. Of 13 projects for which bids were invited earlier for 1,115km, the larger chunk of 841 km was on EPC mode and 273 km on BOT. In addition, 11 proposals are being evaluated by the inter-ministerial PPP-appraisal panel involving construction of 1098 km of highways, of which 1,010 km is in EPC mode.

Sources said the new strategy has been adopted after a detailed talk between NHAI chairman RP Singh and road transport and highways secretary Vijay Chhibber, in line with highway minister Nitin Gadkari's plan to fast-track the process of fresh awards.

"Such a strategy will bring clarity for the government to assess how receptive investors are to the highway sector and launch bids in conformity with market realities so that the projects awarded don't fail at a later stage, said an official from the road ministry.

"As discussed with the ministry for ensuring wider participation by developers and keeping in view the market conditions, packages of projects will be suitably structured. Total project cost of a single EPC package should be around R1,000 crore. Similarly, the length of the average BOT project is proposed around 100 to 120 km," Singh wrote to the roads secretary.

According to NHAI, this restructuring will yield positive results only if the ministry "obtains the requisite decisio-ns to decide the mode of delivery at the level of the ministry to avoid delays in approval".