Highway developers prefer EPC model

NHAI has awarded EPC contracts worth Rs 29,300 cr or 2,526 km under EPC route in FY16 till date

With the National Highways Authority of India (NHAI) awarding 75 per cent of the total road length through engineering, procurement and construction (EPC) route so far in 2015-16, EPC seems to be the preferred mode of the highway developers to take up projects.

According to Emkay Global Financial Services, NHAI has awarded projects worth Rs 42,800 crore totalling 3,421 km in FY16 till date. Of the total, it has awarded EPC contracts worth Rs 29,300 crore (2,526 km), build, operate, transfer contracts worth Rs 10,800 crore (803 km), and hybrid annuity contracts worth Rs 2,800 crore (92 km).

Of 49 projects awarded so far, 20 projects were bid at a discount between one per cent and 27 per cent to the benchmark cost; five projects at par; and 20 projects went at a premium between one per cent and 28 per cent.
 

Engineering procurement and construction (EPC) contracts are the most common form of contracts used to undertake construction works by the private sector on large scale and complex infrastructure projects.The research also highlights that the difference between the (lowest bidder)L1 and L2 remains large which itself signifies that no developer wants to bid aggressively given the strong bid pipeline in HAM model.

However, the government is now putting lot of emphasis on hybid annuity model. The government is looking at awarding 576 km of national highway projects under the new hybrid annuity model (HAM) in FY16.

The NHAI has identified 15 road projects, entailing an investment of Rs13,600 crore and spanning Delhi, Uttar Pradesh, Himachal Pradesh, Jharkhand, Bihar and Maharashtra. Further, for FY17E, the government has identified 15 road projects - at a total length of 1105 km and entailing an investment of Rs 12,185 crore.