Govt looks to auction soon-to-be-completed projects, earn FDI
Malaysia’s government and companies have evinced interest in bidding for new PPP (public-private partnership) projects in the highways sector, and also in taking up projects completed by the government and running them for their full life cycle under a new model.
“They (Malaysian entities) do not want to confine themselves to the building of roads, they are equally keen on buying National Highways Authority of India (NHAI)-owned highways,” a top road ministry official told FE.
As reported by FE earlier, the award of PPP projects, stuck for long, has gathered some momentum recently, with a newly-designed hybrid model under 40% of the project cost to be borne by the government, attracting investors.
Also, the government is keen to attract foreign direct investment (FDI) by offering soon-to-be-completed projects via auction to potential foreign investors, like pension and insurance funds, to run them through the length of their life cycle. In these cases, the government set a reserve price factoring in its investments and the investor offering the highest revenue to it will secure the projects.Road secretary Vijay Chhibber said Malaysian investments looked likely under all these models. Malaysia’s state-run Construction Industry Development Board had earlier also evinced interest in Indian highway projects but no major headway was made by them as PPP sector lost sheen in the final years of the UPA-II government. Banks and financial institutions from the Southeast Asian country were willing to provide debt to the firms wanting to take up highway projects in India, he said.
Malaysia companies have a wealth of experience in the road sector having worked for the sector in around 56 countries.
At a recent meeting with the road transport and highways minister Nitin Gadkari in New Delhi, Malaysian firms were told of the government’s plans for the country’s highway sector and the steps taken in recent times to improve the ease of doing business.
There were also discussion about modalities of procurement and participation in the bidding process. The road ministry is planning to award road projects worth R3.5 lakh crore in the next six months.
The preferred route for this is likely to be PPP model, although until such time the private investments pick up substantially, the EPC (engineering, procurement and construction) route, where the government is the sole investor, will practically continue to be the dominant one.
The Malaysian companies’ visit to India was followed by a visit of road secretary Chhibber to the country. The secretary went to Malaysia in April to showcase the potential of the sector to the government, industry and other stakeholders.