Road regulatory authority proposed in FY14 to settle issues

A road regulatory authority would be constituted this year to address issues such as financial stress, construction risk and contract management in the sector.

Finance Minister P Chidambaram in his budget speech today said that the road construction sector has reached a certain level of maturity but it faces challenges, including financial stress, enhanced construction risk and contract management issues.

He said that these issues are better addressed by an independent authority. Therefore, the government has decided to constitute a regulatory authority for the road sector.

Road Secretary Vijay Chibber said, "Hopefully during this year we will be able to constitute the road regulatory authority."

The key functions of the proposed regulator are likely to be tariff setting, regulation of service quality, assessment of concessionaire claims, collection and dissemination of sector information, service-level benchmarks and monitoring compliance of concession agreements, among others.

Chibber said that since NHAI is a signatory to the concession agreement it cannot be a regulator, changes in the term of concessions would be looked after by the regulator.

"We need somebody who is at an arm's length distance from the contract, it can be a third party oversight," he said.

The Ministry of Road Transport and Highways was contemplating the proposal for a long time as it is of the view that regulation would improve the quality of road projects in the country.

"A regulator would be able to tell the concessinaire (project developer) that if you cannot build quality roads you are not entitled to collect toll tax," Chibber added.

The government also said that the bottlenecks stalling road projects have been addressed and 3,000 kilometres of road projects in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan and Uttar Pradesh will be awarded in the first six months of 2013-14.

The government has also sought assistance from multi-lateral agencies like World Bank and Asian Development Bank to build roads in the North-eastern states and connect them to Myanmar.

This move may also be linked to the recent trend of some private companies exiting road projects on account of delay in obtaining various clearances.

At present, NHAI (National Highway Authority of India) along with the Road Ministry awards projects.

The proposal would go to Cabinet for approval.

Overall, it is estimated that the infrastructure sector will need investment of USD 1 trillion (about Rs 55 lakh crore) in the 12th Five Year Plan period (2012-17).