The tussle between road ministry and Planning Commission was ignited by differences over cost estimates of road construction. According to reliable sources in the government, road ministry has asked Plan panel to revise the average cost estimate of building a kilometre of road to Rs 12 crore from Rs 9.5 crore a year ago. But the Commission was reluctant to approve this.

Planning Commission feels that road ministry cannot have an ambitious target of constructing 20 km of roads a day and simultaneously propose such a steep upward revision in the construction cost of roads. ?Plan panel has asked the ministry to be reasonable in the targets and cost estimates as several funding concerns will arise if they keep pushing for higher estimates,? a senior government official, who has been privy to the discussions between the two agencies, told FE.

The ministry needs to get its road construction plans approved by Planning Commission to get the required funds from finance ministry. Taking over charge as road minister last July, Kamal Nath had set a target of building 20 kilometre roads a day within one year. At that time, the average cost of building a four-lane highway was between Rs 7 crore to Rs 9.5 crore.

Although Nath?s target has not been achieved till now, the cost estimates for a four-lane road have gone up to Rs 10.81 crore a km, figures gathered from National Highways Authority of India (NHAI) show. The data is based on projects already awarded or put to bid during 2009-10.

When contacted, officials from road ministry and NHAI denied that the main reason for the dispute with Planning Commission was cost. ?We have been getting whatever is needed to build roads. The main reason is the difference of opinion within Planning Commission,? a senior ministry official said requesting anonymity as the issue is sensitive.

Last year, the ministry made significant changes in the model concession agreement (MCA) for highway development, based on the suggestions given by a high-level committee headed by Planning Commission member B K Chaturvedi. The original MCA was prepared by Gajendra Haldea, infrastructure adviser to Planning Commission?s deputy chairman Montek Singh Ahluwalia.

A top NHAI official said the revised cost are based on change in prices of construction material and wholesale price index (WPI). Assuming the cost of construction material goes up 7-9% a year and WPI increases by nominal 5% per annum, the building cost for four-lane highway could go up from Rs 10.81 crore to Rs 11.35 crore in 2010-11. Similarly, cost for six-lane highway could go up from Rs 12.47 crore to Rs 13.1 crore during the current fiscal. Majority of NMDP is constituted by four-lane highways.

The cost could also vary depending on the geographical location and the kind of project. ?The expressways are planned on the cost projection of Rs 17.5 crore a km. If it is an elevated expressway, the cost could go up to Rs 60 crore per km,? the ministry official said.

Another official in NHAI said that highway development programme is not entirely implemented with government funding, and a huge amount of borrowing and private investments is also involved.