NHAI may get a smoother ride for choosing highway model

Road transport and highways ministry moves Cabinet for relaxing norms

Troubled by the dismal response to public-private partnerships (PPP) in the national highways this year, the government is likely to simplify norms for choosing investment models. The road transport and highways ministry has moved the Cabinet for relaxing norms that require it first to try out tolling under build-operate-transfer (BOT) model, followed by annuity and then put a project on offer under engineering procurement construction (EPC) contract.

A senior government official told Business Standard the traditional "waterfall model" would be replaced by a simpler process of raising the benchmark to consider BOT to 15,000 passenger car units (PCUs).

"The norm would be changed for the fourth phase of National Highway Development Programme (NHDP IV). The Cabinet Committee on Infrastructure will relax the norm shortly," he said.

The highways ministry wants the government to allow it to use the EPC mode of awarding highway projects for the 20,000 km of projects under NHDP IV. The BK Chaturvedi committee on NHDP had earlier recommended that in case of projects under NHDP IV, if the traffic is less than 5,000 PCUs, the project would directly be taken up on EPC. However, the ministry wants the norm diluted even to the projects where PCU a day is between 5,000 and 15,000. "For PCUs above that, BOT will be adopted," he said.

The existing policy requires that a project to be offered for private investment first under the tolling route. On failure to do so, it is offered under BOT annuity, where the project operator has the comfort of not taking on the traffic risk, but instead is paid a fee by the government during the lease period. If the project is unable to attract private investment even under annuity, then they are to be awarded under EPC after taking specific approval from the Cabinet Committee on Economic Affairs. This mechanism was put in place in order to promote private investment and lower the dependence on budgetary support for highway construction.

The official said the current mechanism was resulting in delay in awarding crucial highway projects despite the required capacity being in place. Besides, the change was also required since private investment was not coming in readily during the current slowdown phase. "If the move materialises, it would fasten the project award speed," said Viral Shah, a senior infrastructure analyst with Angel Broking.

The government has been unable to award the targeted quota highway projects under the BOT  and annuity model of contracts this financial year. The National Highways Authority of India (NHAI) has been able to award only close to 1,000 km of highway projects in the first six months of this financial year. The ministry had planned to roll out 4,000 km of highway projects for construction of two-lane paved roads for the fiscal which has not seen much action again.