Award of highway projects on slow track

Frequent tinkering with bidding norms for the highways sector has slowed the pace of awarding projects. Part of the problem is also due to doubts over investor appetite and the cost of projects.

Between September 2009 and March this year, the National Highways Authority of India (NHAI) had awarded 13 projects a month on an average. But the state-run roads authority could award only 15 projects in the first six months of 2010-11.

While analysts blame it on differences between the road transport and highways ministry and the Planning Commission over changes in bidding norms, senior NHAI officials say the market does not have the appetite for so many projects.

“One of the issues is the capacity available in the market for the projects. Awarding a project is a process and it cannot happen suddenly and when you load the market with a lot of projects, there is a demand-supply mismatch,” said a senior NHAI official, who did not want to be identified.

An industry player, who did not want to be quoted, denied this. “We all want more projects but the government organisations are fighting with each other and thus everything has been delayed.”

For the first time after the economic slowdown, NHAI received no response for 17 of the 95 highway projects it had put up for bidding in the past year. In December 2008, when the global slowdown had hit the Indian market, too, the authority failed to get any response for 13 of the 60 projects it had put up for bidding. “NHAI’s performance in terms of awarding projects has been fairly reasonable but the industry is concerned about the uncertainty over the bidding norms. This is making the industry wary of bidding for projects,” said Amrit Pandurangi, executive director, PricewaterhouseCoopers.

After implementation of the B K Chaturvedi committee recommendations, the road transport and highways ministry and NHAI changed some norms to attract investments but these were opposed by the Planning Commission.

Gajendra Haldea, advisor to the deputy chairman of the Planning Commission, had even written to the finance ministry opposing many of these changes.

A senior Planning Commission official had earlier told Business Standard the road transport ministry suddenly changed the bidding norms after the Chaturvedi committee’s recommendations were accepted.

“They went too quickly about changing the norms. They should have at least waited for a few months before changing them. More dynamism in norms is not always good,” a senior Planning Commission official had said, on condition of anonymity.

An executive of a private construction company added that the total project cost is a major issue and almost all the projects were unviable — some less and some more. “If the project does not receive any bid, it means the project is not financially viable and no one would bid for unviable projects,” he added.