Govt plans monetisation of EPC projects just after completion

The Union government plans to monetise all national highway projects built under the EPC (engineering, procurement, construction) mode immediately after completion of construction. Experts, however, say this should be done only two to three years after completion, and after estimation of traffic volumes, to get better valuation.

 

“It makes sense for the government to monetise new road contracts as soon as these are finished, so that it is never short of money to invest in EPC projects, As far as traffic volumes are concerned, they can be ascertained before,” defends former roads secretary Vijay Chhibber. On August 3, 2016, the Cabinet Committee on Economic Affairs authorised National Highways Authority of India (NHAI) to monetise 111 publicly funded projects. A list of 75 operational projects was prepared for potential monetisation, using the TOT or toll, operate, transfer model. The proceeds from these projects would be utilised for development, and operations & maintenance of highways.

 

According to an official in the know, the road transport ministry and NHAI are considering the monetising of the Eastern Peripheral Expressway (EPE) as soon as construction work on it is over. The 135-km project is being built to connect Kundli to the north of Delhi on National Highway-1 with Ghaziabad in Uttar Pradesh, at an estimated cost of Rs 11,000 crore. Immediate monetisation would allow the government to save on operation and maintenance cost. Some question this logic. “In principle, there is nothing wrong in monetising road contracts but upfront monetisation is not a good idea. Traffic volumes pick up only after a few years and true traffic potential of a project can be evaluated only in three to four years,” says Abhaya Agarwal of consultancy EY India said.

 

NHAI has started the process of monetising a bunch of highway contracts. In the first tranche, of the 75 such contracts to be monetised, the authority has invited a Request for Proposal in eight. These projects are expected to entice sovereign funds from Abu Dhabi, Qatar and Canada to invest in India’s infrastructure. The selection of projects was done by the central government after several rounds of consultation with the potential suitors. For instance, for any global fund to invest in the India market, the size of a particular road project should not be less than $200 million (Rs 1,300 crore). Else it would be financially unviable for the international investor.

On a new path

• Immediate monetisation would allow the govt to save on operation and maintenance cost
• Experts, however, say this should be done only two to three years after completion to get better valuation
• A list of 75 operational projects was prepared for potential monetisation, using the TOT or toll, operate, transfer model