Nath seeks Plan panel views on bid documents

Written by Praveen Kumar Singh | Praveen Kumar Singh | New Delhi | Updated: Jul 31 2010, 04:10am hrs
Road transport and highway minister Kamal Nath has sought Planning Commissions advice on the World Banks demand for change in model bid documents on construction of highways. The ministry is seeking a $2-billion loan from the multilateral financing institution to fund the VGF components of highway projects, but it is feared that the Bank would pitch for modifications in the documents. It has already called for changes in annuity structure to finance annuity projects.

The finance ministry had last month rejected road ministrys demand to seek the loan from the World Bank, saying any change in model documents for highway projects that are approved by public private partnership approval committee and other high-level government bodies is not acceptable.

The government has recently made some significant amendments in the papers to rope in more private companies and it is reckoned that continuous changes in the policy would hamper the ambitious road development programme.

In a letter written to Planning Commission deputy chairman Montek Singh Ahluwalia, Nath has tried to assuage finance ministrys concerns regarding the change in bid documents. While negotiating with the Bank, we would not compromise with the national policies in PPP and be within those policy parameters. In case the Bank agrees to lend on such terms, I consider this would further accelerate growth in the national highway sector and reduce the cost of borrowings required to meet the government liability toward VGF and annuity payments. I would request you for your views on the matter, he wrote earlier this month.

The request has come at a time when road ministry and some senior officials of the Commission are involved in a bitter battle over policy issues on highway construction.

The National Highways Authority of India (NHAI) bid projects in three categories, namely BOT (toll), BOT (annuity), and engineering, procurement and construction. In order to make the projects attractive, it pays VGF to developers of BOT (toll) projects, while annuity is paid in case of BOT (annuity).

To finance the VGF component alone, NHAI requires Rs 41,000 crore by 2018-19. It also needs over Rs 2 lakh crore for payment of annuity by 2030-31, as per last years report of the committee on highway development headed by Plan panel member BK Chaturvedi.

In a meeting with Nath in May this year, Ben LJ Eijbergen of South Asia Sustainable Development Department _ a World Bank body _ said that the institution could fund VGF and annuity components. But in order to do so, he said certain modifications in project format have to be made. To start with, Eijbergen suggested a change in annuity structure.

The road and transport ministry has set a target of awarding 37,000-km road development projects by 2013-14. It also expects to start building 20-km roads a day from November this year. NHAI was able to award 3,351-km projects in 2009-10 against the total target of more than 12,000 km. The gap was met through public works departments and border road organisation.