Road ministry mulls rebidding options

Build-operate-transfer model finds little favour; other ideas being considered

The roads ministry plans to restructure projects that have been stuck for long. Restructuring 25-30 projects has started in the National Highways Authority of India (NHAI).

Among the options being considered is rebidding projects at an updated cost or breaking them into phases. The method of awarding contracts could be modified into engineering, procurement and construction (EPC) or build-operate-transfer (BOT) modes through private partnership. "A decision would depend on the next government," said an official.

About 15 projects have applied for rescheduling of premium under the new policy. The rest would also be restructured, said a senior official in the ministry.

With not much success in BOT-model projects, the ministry is looking at awarding contracts either only in the EPC mode or a higher percentage of EPC and the rest in BOT mode, the official added.

Unlike in the BOT model, in the EPC method the government funds the entire project and a developer undertakes the necessary construction work. BOT requires a private-sector developer to raise and invest money for construction of roads at its own risk; NHAI acquires the land. Given the slowdown, the government could not award close to 20 projects during 2013-14 under BOT.

GVK Power and Infrastructure and GMR had already cancelled their projects with NHAI, citing clearances issues. According to the official, GVK might be allowed to exit harmoniously its Rs 3,000-crore Shivpuri-Devas project.

Many road projects are stalled by developers running short of cash and the government has allowed the companies to reschedule premium payments. More than 15 project developers, of the 39 eligible for the relaxation, have sought rescheduling of premiums. These developers have to pay NHAI Rs 25,000 crore over the next 20 years.

Premiums are rescheduled when developers cannot service its debt, operating expenditure or pay NHAI. If the projected toll revenues fall short of the cost-plus premium, the government would consider the deferred amount as a loan to the developer and might charge interest at an annual rate of 10.75-11 per cent.

NHAI board is likely to decide on premium rescheduling applications only after a new government is in place.

In many cases, NHAI and the developers have failed to meet certain requirements for these projects. In some cases, developers are unwilling to build the project as costs have gone up, said an expert.

During 2010-2012, developers had bid aggressively when the government awarded a record 147 road projects, worth Rs 1.47 lakh crore. Then, India's economic growth was much higher but slowed subsequently. Input and costs have gone up since. Currently, road projects worth Rs 83,000 crore are pending completion. Since 2009, the United Progressive Alliance government recorded the completion of only three projects, adding just 315 km to the highways' network.