As the new year dawns, it?s the time to take stock. For the highways construction sector, the year that began on a promising note with awarding of contracts for Rs 9,000-crore projects in February, did not end with a positive indication for the future as there are still issues like delays over litigation, land acquisition and inconsistency in policy, among others that policy makers, participants and the National Highways Authority of India will have to deal with.
With these issues crippling growth in the sector, the performance got dimmed towards the middle as well as at the year-end. This is indicated by the fact that against a target of four laning of 2612 kms, only 2068.37 kms could be achieved till October 2008. Also, widening to two lanes was short by almost half at 390.27 kms against a target of 831.30 kms. Construction of bypasses was more dismal at only 9 kms against a target of 25 kms.
Experts blame this on lack of clarity and co-ordination on the government side, coupled with the economic slowdown.
?The year started with a bang, but the towards the end, the performance became dismal. A total of five six-lane highway projects worth Rs 9,000 crore were awarded in the month of February 2008. However, introduction of the new model concession agreement containing provisions like technical qualification and cap on the number of bidders for financial bidding created a lull in the biding process,? said Vishwas Udgirkar, partner (Infrastructure), Pricewaterhouse Coopers.
This clause capping the number of bidders at top five or six at the financial bidding stage was challenged by the National Highways Builders Federation in January this year. ?The year started with a petition in the Delhi High Court in January challenging the Model Concession Agreement. Since then, no project was taken up as the government was also uncertain about the future of the concession agreement,? said M Murali, director general, National Highways Builders Federation.
With the clouds of uncertainities lingering on the sector, there was a lull for over six to seven months before the government put 60 projects worth Rs 65000 crore in September and targeted to bid them out by the year end. However, by this time the introduction of new clause capping the number of projects a bidder can participate in and execute coupled with liquidity crunch dissuaded the bidders away from taking up the projects.
?With the government putting around 57 projects on the block for biding in September this year created some hopes, but by that time, economic slowdown and liquidity crunch started hurting the sector,? Udgirkar added.
?As far as completion of the projects as well as the tendering process was concerned the government did not score well. With the uncertainties still lingering on, the 57 projects for which the government started inviting the bids in September and targeted to finish the process by December 2008 also got delayed during the tendering process,? Murali added.
Speaking on the policies, Udgirkar said, ?Whenever you come out with new guidelines, it is very important to educate the stakeholders about it. There was a lack of clarity on that front from the government side. This created a lot of procedural roadblocks in the tendering of the projects. Subsequently, when the government started to make up for the lost time, the bidders were unable to respond in such short notice.?
?The introduction of shortlisting of bidders at top five or six in the new model concession agreement also delayed the projects. This experimentation should not have been done universally for all the 60 projects. What the government should have done is that the new framework should have been tested on a smaller number of projects on a pilot basis. This would have helped understand the viability of the model in a better manner for both government and the various stakeholders. It could have later been introduced accordingly for the other projects,? added Murali.
Speaking on the other issues that require immediate policy level addressal, Murali said, ?The basic issue in delays in road projects is land acquisition, which is a state government responsibility. There should be a proper inter governance collaboration to deal with such situations. There should be a common land acquisition policy. Delays in the land acquisition happens in the normal course. 70% delays in the road projects happen due to roadblocks in land acquisition.
Enumerating other initiatives that the government needs to take to put the sector on the fast track, Murali said, ?The government should thrust more on the state highways. There should be a uniform interest rate policy or a subsidised interest rate policy,? he added.