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| Vandana Gombar: Anyone for nextgen roads? | | ?Bid for a job if you qualify. Get a partner if you don?t qualify? |
| Vandana Gombar / New Delhi Aug 25, 2009, 00:38 IST |
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‘Bid for a job if you qualify. Get a partner if you don’t qualify’
It seems audacious to work on a plan to build a greenfield expressway network in the country when we can barely get our act together on roads of the conventional kind. And that too when their cost — at about Rs 18-20 crore a km — is double that of conventional roads. Yet, there exists a draft report which envisages 17,650 km of a national expressway network by the “horizon year 2022” against the couple of hundred kilometres that exist currently.
This expressway masterplan could be considered audacious or simply seen as smart futuristic planning taking cognisance of the growing road demand and the paying capacity of the users. Your take on it would depend on what lens you are looking through — the critical one or the neutral one.
There are of course many reasons for being critical of the roads sector which has seen scant progress in the recent past despite the fact that it is supposed to account for the second largest spend in the $500 billion envisaged for the infrastructure sector in the 11th Plan, the largest being the power sector. This tardy progress could be attributable to anything from the global financial crunch to clauses in the model concession agreement which kept the bidders away.
Bidders have other woes too. Eligibility norms keep on changing, and are set to be changed again. Lock-in clauses are a concern. Termination clauses are worrisome. There are right-of-way issues. Shifting of utilities’ assets (transmission lines, water pipes etc) is effort-intensive and time-consuming, as is the process of getting environmental clearances. There are design changes mid-way and then there is squabbling over the money that is recoverable. And then there are various disputes which have led to thousands of crores of rupees of the builders as well as the lenders being frozen.
There are however some things which are working right in the roads sector.
A whopping Rs 100,000 crore worth of projects are set to be bid out under the National Highway Development Programme in the current year of which a little over Rs 60,000 crore spread over 75 projects will be done by December 2009. There is a target to accelerate road building to 20 kilometres a day against a historical record of some 4 km per day, and this is just limited to national highways. There is a lot of action in the state road sector too. Some other positive trends in the road sector which stand out are:
BOT SWITCH: There seems to be a clear move away from so-called cash contracts notorious for their time and cost over-runs to toll-based build-operate-transfer (BOT) projects under the public private partnership mode. The project concessionaire typically shares the risks and rewards with the government. Where tolling prospects are limited, BOT projects based on annuity payments are becoming the norm. Given the size of the opportunity, and the structuring of the projects, there are new companies taking up road projects. Reliance Infrastructure, for instance, got into the road development business four years ago.
NEGATIVE GRANTS: Though there was a demand raised some time ago to raise the viability gap funding limit from the current level of 40 per cent, the fact is there are projects which have received bids with negative grants, where a bidder has offered to pay the government to get the right to build the road instead of seeking a grant from the government to make the project viable. Road projects are not only becoming viable on their own, they also yield good returns.
FOREIGN INVESTMENTS: The din of what is not right with the roads sector masks the fact that there are overseas firms that are already active in the country and have successfully bagged road projects in partnership with Indian firms. Take the case of one of the largest projects bid out in the recent past: the Rs 2,300 crore upgradation of the Panipat-Jalandhar stretch of the National Highway (NH-1) to 6-lanes from 4-lanes across 291 kilometres. It was bagged by Soma Enterprise in partnership with Spain’s Isolux Corsan.
The mood in the industry can best be summed up with what was said by Larsen & Toubro’s executive vice-president K Venkatesh at a conference on road development last week: “Bid for a job if you qualify. Get a partner if you don’t qualify. We will see where capital will come from.” If that is the thinking of one of the larger road builders in the country, you might as well get ready for the expressways!
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