40% highway contracts under new EPC norms

The government is likely to award 4,000 km of highway projects under the new engineering, procurement and construction (EPC) contract this year. This will be part of the 9,500-km target set for the national highways by Prime Minister Manmohan Singh.

Under the EPC model, the government funds the project completely and the contractor has to just construct the road. This move is expected to minimise the time and cost over-runs. This will also enable a faster roll-out of projects. Senior officials told Business Standard Union Minister of Road Transport and Highways C P Joshi, in a meeting of parliamentary consultative committee on Wednesday, had indicated the projects this year would largely be awarded on EPC basis. The cabinet committee on infrastructure is expected to approve the new EPC model this month after discussions with other ministries, an official said.

The new projects will primarily aim at double-laning of single-laned roads.

Officials close to the development said Joshi also explained that no National Highway Authority of India (NHAI) declared highway in the country would remain single-laned by the end of the 12th five-year Plan.

“Bringing these projects under the EPC will attract other construction companies, as now a lot of them are not attracted to other projects due to economic the slowdown,” an official said, adding that the minister also aims at completing double-laning of 20,000 km of roads under the EPC model. However, the time period for this target has not been set till now.

The EPC model actually means that the government funds the project completely and the contractor just has to construct the road. This move is expected to minimize the time and cost over-runs characteristics of the extant item rate contracts. This will also enable a faster roll-out of projects.

While the item rate contracts rely on specific designs provided by the government, the EPC contract only specifies the required design and performance standards and allows the contractor to bring in innovation to optimize efficiency.

Joshi informed the committee that the EPC contract provides performance based standards for the maintenance of the projects while specifying the dates on which different sections of land would be handed over to the contractor. It also addresses issues relating to suspension of contractors rights, change in law, insurance and indemnity.

Almost 7900 km of highways was awarded in the previous financial year. The PM, in June, scaled up the target for building national highways, from 8,800 km announced in this year’s Budget to 9,500 km for the current fiscal.

However, the award of projects in the first quarter has not been in line with the target as projects covering just 99 km were awarded by the NHAI against the target of 1,500 km.