The new networth criterion for national highway projects has an enabling provision for smaller companies. National Highways Authority of India (NHAI), the nodal agency for development of national highways, has decided that a company can bid for a project even if it has a lower networth, provided it raises equity from the market before submitting a bid.
Raising equity will enable the company enhance its networth, although the raised money will reflect in the balancesheet only at the end of the financial year. ?It would be unfair to deprive such companies of the chance to bid for big highway projects, particularly when the networth norms are being tightened. This condition is being inserted to give the applicant credit for the cash flow in the assessment of networth, which is below the prescribed level otherwise,? a senior official of NHAI told FE.
In its board meeting on March 20, 2010, the authority raised the networth requirement for bidders to ensure that only serious players come forward with technical bids and the ?name lending? is stopped.
As per the decision, a bidder for a project costing more than Rs 2,000 crore has to have a networth of Rs 500 crore in addition to 50% of the sum by which the project cost exceeds Rs 2,000 crore. In case a project cost is more than Rs 3,000 crore, a bidder needs a networth of Rs 1,000 crore plus 100% of the sum by which the cost exceeds Rs 3,000 crore. Before the NHAI decision, the bidder had to have a networth of 25% of the cost.
As per the official, networth of the applicants received so far range between Rs 50,000 to Rs 14,023 crore. The majority have a networth between Rs 250 crore to Rs 1,000 crore.
Analysts said the decision to raise the networth criteria might have affected the bids for the ambitious mega highway projects and this new provision will reverse the effect to some extent. The government wants to develop highway stretches expanding to 400 km each at a cost of around Rs 4,000 crore per project. The road transport and highways ministry has identified 10 such projects till now.
The authority has planned to bid out projects for development of 7,305 km of national highways during the current year. It is also pegged to begin the process of awarding the mega highway projects. During last financial year up to February 28, NHAI could award 36 projects for widening of 3,166 km of highways only.
