Malaysia takes the road less travelled

Written by Timsy Jaipuria | New Delhi | Updated: Oct 18 2014, 17:21pm hrs
At a time Indias public-private partnership (PPP) projects designed for highway construction have few takers, banks have developed cold feet with regard to the sector and a disgruntled government is busy revisiting the model of publicly funded (engineering, procurement and construction or EPC) projects, some foreign investors seem to provide a contrast. Emboldened by the interest evinced by the Malaysian governments Construction Industry Development Board (CIDB) in five PPP projects that had got no bids, the ministry of road transport and highways is giving the projects another try by relaunching them, shelving a plan to develop these projects through EPC contracts.

The projects that will be placed again before potential investors have an estimated total cost of over Rs 9,300 crore and include the R4,500-crore Eastern Peripheral Expressway in the National Capital Region and two long stretches in Punjab. In PPP projects, developers and the government enter into a concession agreement that provides for the former to recoup their investments with profits by tolling. In the past, some leading domestic infrastructure firms deserted high-profile highway projects awarded to them after competitive selection, citing toll collections falling way behind projections and escalation in project costs owing to delays in various clearances.

While CIDB, formed under an Act of that countrys Parliament, promotes the interests and capabilities of infrastructure firms in Malaysia, China is also looking at Indias road projects with renewed interest, though Beijing would in most cases prefer EPC projects and would want them to be given to Chinese firms, disinclined as it is to come in through the competitive route.

Official sources said while four projects Malaysia has shown interest in have already been relaunched for development under the build-operate-transfer mode, in the case of the 135-km Eastern Periphery Expressway the bids will be invited this week (see table).

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Malaysia is a major potential foreign investor in India, with investments lined up in the power, oil refineries, telecommunication and electrical equipment industries, apart from highway and other infrastructure development projects.

Prior to the Malaysia showing interest in the five highway projects, the Indian government had decided to award these projects under the EPC mode, which has gained currency recently after drawing a blank between 2008 and 2012, the period that saw the PPP model being embraced by policymakers.

Close to 189 highway projects involving investments of around R1,80,000 crore are stuck due to problems of land acquisition, delays in forest and environmental clearances, non-transfer of defence land and hurdles in rail overbridges. Indian developers, confronting these problems and being financially stretched, have remained lukewarm in response to several new PPP projects presented by the government. The previous government could only manage to award projects for 3,169 km of the around 5,000 km of projects that went for bidding in 2013-14.