NHAI alters bid process, project terms to lower risk for potential investors.

After failing to get bids for over half of its highway projects last year, the National Highways Authority of India (NHAI) has decided to put up 19 highway projects worth Rs 23,805 crore for rebidding next month through a new short-listing process.

The projects are also being restructured from the build-operate-transfer (BOT) model to either a BOT-engineering procurement and construction (EPC) or an annuity model that will decrease toll considerably. This is meant to reduce the risk for companies involved in these projects.

Under the earlier bidding system, only six top companies were eligible for financial bids. They were chosen on the basis of a scoring system that included criteria such as net worth, revenue, global experience and number of projects handled.

Indian construction companies, however, strongly opposed the scoring system because it tilted the balance in favour of global companies. Smaller construction companies also found that they were being forced to tie up with international construction giants merely to qualify though they were taking all the risk.

“Also, the earlier procedure of selecting the top six took four months more than if the bidders are selected on the basis of a technical threshold,” said M Murli, General Secretary of National Highway Builders Federation of India.

NHAI, however, received bids for only 22 of the 60 projects up for bidding, of which only seven have been awarded.

An NHAI official said the remaining 19 projects would also be put for bidding in the next few months.

Six out of the 19 projects will be based on the annuity model. This means that the developer will not levy a toll on the road it builds to recover costs. Instead, investment cost and the margin of profit will be reimbursed by the government in tranches . For the remaining 13, the toll will be levied on the road stretch but users will not have to pay an extra toll on the use of bridges and other structures built on the highway stretch. That is because these will be built by the developer as an EPC project under which money will bepaid directly by the government

Experts, however, said the new norms may not attract bidders either. “You also have to remember that the configuration for the projects has not changed.

The costs are still the same and the viability gap funding has not been increased,” said Sanjay Sethi of Kotak Infrastructure. Viability gap funding refers to the government puts in the money to meet the gap between the projected cost and what the companies actually bid for.

New Ipad Application :Business Standard's all new IPad App Click here to download for free Other Stories      - Markets trading higher amid volatility - Cong pledges to make Nagpur as S'pore, BJP ridicules idea - Gold futures drop by Rs 114 on weak Asian cues - January inflation at 6.55% - Hanung Toys, Archies soar 10% on Valentine's Day

Tags : NHAI | BOT | EPC | M Murli |   Read Business news in  Advertisements -  Now property search gets more exciting than ever before! -  High Growth Business Opportunities in Africa - Register to explore -  Office 365 for professionals and small businesses. -  Are You Serious About Your Future? Click here to know more -  Financial Learning now made easier and more convenient. -  Earn fuel worth Rs.2400 with Citi -  India's No. 1 Property Site. Click here to know more.. -  Get 5% cashback on telephone bills with Citi -  Exim Bank Conclave on India - Africa Project Partnership. Know more.. -  Be part of it The World's Largest Aircraft. -  Creating Wealth made simple the SIP way. Know more.. -  Only Developer to give a guarantee on time space & rate. -  Buy Your Property with Our Triple Guarantee in India. -  Improve Patient Care & Experience. Click here to know more -  Win a Business Class Ticket to Europe..Know more.. -   Introduce a New Automotive Luxury Car.. know more -  Health is Wealth..... Insurance + Savings... Know More...