Govt proposes easier terms for road projects

The government plans to ease several conditions in the model concession agreement (MCA) for highway projects to address key complaints from construction companies and attract more bidders.

The changes include significantly increasing the stakeholding in the conflict-of-interest clause, removing the termination clause for concessionaires, introducing an exit clause for the lead partner in a special purpose vehicle (SPV) and changing the minimum threshold limit of projects executed by a company bidding for a new project.

A senior roads and highways ministry official said the proposals have been submitted to a committee headed by Planning Commission member B K Chaturvedi that was constituted by Prime Minister Manmohan Singh to resolve issues impeding road projects.

The committee also comprises Finance Secretary Ashok Chawla and Road Secretary Brahm Dutt and is expected to submit its report on August 24.

The stakeholding threshold in the conflict of interest clause has been raised from 5 to 15 per cent. Earlier, SPVs in which any developer had more than a 5 per cent shareholding each were barred from bidding for the same project. By raising the cut-off to 15 per cent, the official hopes that fewer potential bidders will be eliminated from the bidding process.

Current norms also bar the lead partner in an SPV to exit by selling its stake after the construction of the project is over and is mandated to stay till the concession period is over. The new MCA proposes to introduce an exit clause for the lead partner.

The termination clause in the MCA currently allows the National Highways Authority of India (NHAI) to take back tolling rights from a concessionaire anytime before the concession period is over, if the concessionaire has recovered its investment on the project. The government now proposes to remove this clause, to introduce a higher comfort level for bidders.

The government is also considering easing the threshold limit to allow more potential bidders. Currently, a company bidding for a project of Rs 5,000 crore should have undertaken similar projects worth Rs 10,000 crore (or double the size of the project it is bidding) in the previous five years.

These measures to attract more bidders have become urgent, given Roads and Highways Minister Kamal Nath's target to build 20 km of roads per day from the current 3 km a day. Taking it forward, the NHAI has come with an annual work plan to put for bids projects worth Rs 1 lakh crore.