The Planning Commission has decided to appoint consultants to ensure that draft concession agreements on national highway projects are technically sound. The commission wants to be confident that the technical specifications of the projects are as tight as possible so as to prevent time and cost overruns, which delay the government’s plan of building infrastructure in a time-bound manner and derails the allocated budget for the same.
The Commission has in the past had raised questions on time and cost overruns in public private partnership projects, mainly in the national highway sector. As per government data of August 2010, 65% of road projects taken up by NHAI suffered time and cost overruns. World Bank data of October 2009 showed that 40% of road projects faced cost overrun between 25% and 50%.
Till now, National Highways Authority of India (NHAI) creates the draft concession agreements for highway projects with help from consultants and send the proposals to road transport and highways ministry for approval. The ministry in turn sends it to Public Private Partnership Appraisal Committee (PPPAC) and Planning Commission for vetting. Planning Commission’s role is to see whether the concession agreement conforms to the model concession agreement on legal and technical grounds. However, technical aspect is only glanced through for want of relevant expertise.
As per the decision of Planning Commission, the panel wants to improve on the technical ground. For this, it has initiated the process of empaneling a maximum of five technical consultants. ?NHAI gets the project proposals drawn through experts, but Planning Commission does not have the wherewithal of vetting the same for lack of technical knowledge. This is the first time that we are going to appoint consultants to do the technical due diligence,? a senior official in Planning Commission told FE, requesting anonymity. Another official said, ?Appointing legal consultants for PPP projects is a regular practice?.
A senior official in NHAI said, ?Planning Commission looks at all the aspects of road construction. I don’t think it lacks in technical knowledge of such projects. It can very well do it on its own?.
NHAI needs Planning Commission approval before it goes to the Cabinet Committee on Infrastructure for the final nod on projects that require viability gap funding (VGF) from the government. As per model concession agreement, national highway projects can be given a maximum VGF of 40% of the total project cost. In case the cost of the project changes over time, the amount of VGF also has to be changed and this takes the allocated budget for highway development for a spin. NHAI has planned to award 7,300-km highway projects with a total cost of nearly R60,000 crore in 2011-12.
As per Planning Commission officials, technical consultants will have to look at traffic projections, alignment, provision of service roads and their design, number of toll plazas. But more importantly, it will check the break up of cost and time of completion of the project. It will have to tell the Commission whether the cost and time schedules are reasonable. The consultant will also have to give an undertaking of non-conflict of interest in advising for the projects. The appointment of the consultant will be for one year, which can be extended to a maximum of three years based on its performance and Planning Commission’s requirements.