Govt Worried As Pvt Sector Remains Cool To Road Projects

The continued lukewarm response of the private sector to highway projects, despite the package of new incentives and concessions offered to them recently, has confounded the officials.

Although some private investors have come forward, say officials, their interest remains largely confined to small projects like bridges and bypasses, while there are not many takers for large projects, such as, widening of two-lane highways to four lanes.

Feelers from investors received by the ministry indicate that private investors have two major fears with regard to highway projects: first, that the anticipated toll revenue may not materialise, and second, that foreign debt servicing and profit repatriation would be severely affected in the event of depreciation of the rupee.

Private parties want the government to guard them against the two risks.

It is felt that commuters would be willing to pay toll for a new highway, but may be reluctant to pay for the use of an old highway that has just been widened to four lanes.

As an alternative, it has been suggested that widened highways be provided with service lanes, so that those unwilling to pay the toll have another route available.

But this will push up the project cost substantially.

A second alternative could be, as some investors have suggested, that the government take up toll collection.

This will make the private investor, who would be looking after maintenance and management, free from the travails of toll collection.

At the same time, the private party will be assured of a minimum toll revenue agreed upon mutually.

However, if the government is to take up toll collection, the existing policy will have to be recast.

Regarding exchange risk protection, the private sector, especially foreign investors, say their profits in dollar terms, as well as foreign debt servicing, will be severely affected if the rupee depreciates.

The government has rejected this demand but investors feel it is still an open issue.

A second thought may be given to the subject after the return of the delegation led by cabinet secretary T S R Subramaniam which is in the United States to seek investments in Indias infrastructure.

The new set of incentives offered to private highway projects including tax exemption to real estate properties, exemption of customs duty on equipment, government grant up to 40 per cent of the project cost, and extension of the tax holiday period from 12 years to 20 years has been welcomed by the apex chambers of commerce and industry.