In a significant development for the road sector, the National Highways Authority of India (NHAI) on Friday tightened the networth criteria for bidders of national highway projects to ensure that only serious players come forward with bids. The move will also prevent the practice of ?name lending? in which a major player forms a consortium with a smaller one but does not take active interest in the project.
Currently, if a project costs up to Rs 2,000 crore, the bidder has to have a networth of 25% of the cost. NHAI has changed the request for qualification document for projects costing more than Rs 2,000 crore.
According to the decision taken by the NHAI board, a bidder for a project costing more than Rs 2,000 crore but less than Rs 3,000 crore is required to have a networth of 50% of the sum by which the cost exceeds Rs 2,000 crore. This will be in addition to the existing networth requirement of 25% for the cost of up to Rs 2,000 crore. For example, if a project costs Rs 2,100 crore, the bidder is required to have a networth of Rs 550 crore?Rs 500 crore (25% of Rs 2,000 crore) and also Rs 50 crore (50% of Rs 100 crore).
In case a project costs over Rs 3,000 crore, the bidder has to have a networth of 100% of the sum by which the cost exceeds Rs 3,000 crore. For example, if the project cost is Rs 3,100 crore, the networth requirement will be Rs 1,100 crore?Rs 500 crore (25% of Rs 2,000 crore) plus Rs 500 crore (50% of Rs 1,000 crore) plus Rs 100 crore (100% of Rs 100 crore).
The nodal agency for awarding highway development contracts has also increased the networth requirement for consortium partners. Under the new qualification criteria, a partner of the consortium should have networth of at least 12.5% of the total project cost.
The move comes just weeks before the start of the process to invite bids for mega highway projects, each costing Rs 4,000 crore. ?The first thing that we don?t want in the highway development sector is ?name lending?. This is acting as a hurdle in our endevour to achieve the highway development objective. We also want only serious bidders to bid for our projects. The decisions that we have taken are likely to ensure clean and timely construction of high-ways in the country,? a senior official of NHAI told FE on the condition of anonymity.
The measures follow an earlier attempt by the ministry of road transport and highways to limit the number of bidders. ?That attempt had hit a roadblock at the court and the ministry was directed not to move ahead with the plan. Now, it is trying to do the same by making such changes in the bidding documents,? PricewaterhouseCoopers executive director Amrit Pandurangi said. Pandurangi also added that the ministry should have some consistency in the norms in order to attract interest from foreign players. ?It should retain the rules for at least three years if foreign players are to participate. If you are going to change the norms every two months, how will you attract foreign players?? Pandurangi asked.