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FinMin supports plan panel on road bid norms

Mihir Mishra & Devika Banerji  |  New Delhi 

Says changes in guidelines will usher in a tighter regime for highway projects.

The Union finance ministry has endorsed the views of Gajendra Haldea, infrastructure advisor to the deputy chairman of the Planning Commission, who had objected to recent changes in bidding norms by the National Highways Authority of India (NHAI).

NHAI had made many changes in the bid documents, which included not allowing companies which had already won bids for three road projects but not achieved financial closure in any of these, to bid for new ones.

Haldea had written to roads secretary Brahm Dutt, with copies to finance secretary Ashok Chawla and expenditure secretary Sushma Nath, expressing his objections. The letter said these changes “will create a more restrictive environment, reduce competition and enable cartelisation”.

The finance ministry, in an office memorandum sent to Dutt, has endorsed the view that the recent changes will “impose a tighter regime for pre qualification in road projects”.

* NHAI changes bidding norms
* Haldea says changes will lead to cartelisation
* Finance ministry backs Haldea’s views
* NHAI says amendments had board approval
* NHAI board has representatives from Planning Commission, finance ministry

Gajendra Haldea refused to comment on the issue. “There are many official communications and it would not be right to comment on them,” he said.

The letter, issued with the approval of Finance Minister Pranab Mukherjee, says financial closure for highway projects takes around six months. So, telling companies which won three highway projects but hadn’t achieved financial closure of any that they couldn’t bid for new ones would be detrimental on balance.

It also endorsed Haldea’s view by objecting to the NHAI amendment, which entails increasing the financial eligibility criteria for bidding for large projects. The ministry said this amendment will benefit the wealthier and foreign companies.

On introducing an eligibility criteria for sub-contractors, the finance ministry again agrees with Haldea’s views, that this will unnecessarily burden road developers. Sub-contractors are those who build roads for the contractors which have won the bids. NHAI had done this to check low-quality work.

However, NHAI notes representatives from the finance ministry and the Planning Commission were on its board. Since the board did the changes, the objections weren’t tenable, said a senior NHAI official who did not want to be identified.

The performance of the road transport and highways ministry under Kamal Nath came under focus recently when Haldea released an issue paper titled ‘Sub-Prime Highways?’, which predicted NHAI would go bankrupt in three years. The paper, prepared by the secretariat for infrastructure in the Planning Commission, was sent to the ministry and NHAI.

Stung, Nath called the Commission’s Deputy Chairman, Montek Singh Ahluwalia, who said it was an issue paper, not something finalised by the Planning Commission. NHAI termed the paper confused and selective, besides contradicting the B K Chaturvedi committee recommendations on the subject.

Last week, Nath had termed the Planning Commission an “armchair advisor” at an event where the Commission’s Deputy Chairman, Montek Singh Ahluwalia, was present. Ahluwalia later played down the controversy by stating that “government was about creative tensions” among its various wings.

Earlier, any change in the concession agreement and bidding procedures were undertaken by an inter-ministerial group. A committee under Chaturvedi, a Planning Commission member, was formed by the Prime Minister to recommend measures on how to expedite road projects. The committee wanted powers given to the NHAI board to change the bidding norms. Most of its suggestions were accepted.

First Published: Sat, July 17 2010. 00:08 IST