Two dozen highway projects await funding

NHAI has awarded contract for only 600 km this year

In what spells trouble for the infrastructure sector, around Rs 25,000-crore worth national highways projects are awaiting funding and are seeking extension of financial closure deadline. These projects constitute 23 packages and comprise 2,500 km of construction.

The project award pace of the National Highways Authority of India (NHAI) has also slowed down with just over 600 km of highway projects awarded in the first two quarters of the fiscal, against the ambitious target of 9500 km set by the prime minister, said Minister for Roads and Highways, CP Joshi.

A senior NHAI official said the extension were being sought due to various reasons like land, environment and other such clearances. A company gets 180 days to financially close a project. If it is unable to do so, it gets a grace period of 120 days, with a penalty. If the company is still unable to complete it, the project award is cancelled. It is either rebid or awarded to the second lowest bidder. Though so far only two contracts have been cancelled, all the 23 projects that are seeking extension are in the grace period.

Speaking at the Economic Editors Conference, Roads and Highways secretary AK Upadhyay said that there are challenges in the public private partnership (PPP) projects this year on various clearances as well as finance. These projects are all four laned projects awarded last year. The cost of construction in these projects is Rs 10 crore per km, said the official.

NHAI awarded 62 projects covering 7,957 km last fiscal many of which were bid at a premium. Two projects awarded by the NHAI last year were terminated after failure to achieve financial closure which included projects worth about Rs 2,450 crore awarded to DSC Ltd and Gannon-Dunkerley Co Ltd. This was the first time that such termination had to be done due to failure of companies to make financial closure.

Financing of road projects have become an issue with the banking industry, primarily due to the fact that the balance sheets of road construction companies are heavily loaded with debt, analysts explain.

Earlier this fiscal, a meeting too was arranged by the Ministry of Roads, where the construction industry, banking industry as well as the government discussed the problems facing the sector, including financing issues.