After a three-month hiatus, the government has set the ball rolling for giving out over Rs 14,000-crore worth of national highway projects. Over 40 companies would be in fray for 30-odd projects in this tranche.
Though this is likely to give a boost to investor sentiment, the projects are all funded by government and would not see any private funding. National Highways Authority of India and the ministry of road transport and highways are currently engaged in appraisal of the request for qualifications, said a senior ministry official.
All most all the projects involving construction of 4,000 km will be brownfield involving two laning of existing single-laned projects. Besides, no significant big ticket project is coming up.
Still, analysts feel this will bring optimism in the roads construction industry as it will boost the order book of construction companies. “This was the only sector that was doing good among the infrastructure sectors. But it has also been hit by pessimism in the last couple of quarters. So, these projects will bring some optimism in the sector,” a Mumbai-based analyst said who tracks private equity investments in the roads sector.Besides, with funds for these projects coming directly from the government, the companies would not be burdened financially.
These projects would be taken up under the new engineering, procurement and construction model that was put in place in August. According to an official of the Ministry of Roads, the NHAI will preside over 2800 km of these projects while the ministry will take care of the rest. As a part of his renewed focus on the infrastructure sector, the prime minister envisaged awarding of 9500 km of road projects this year. However, the NHAI was able to award only close to 700 km of projects in the first two quarters of the fiscal.
Financing may not be concern for these projects but ground-level problems may create problems. “The targets for this year could increase pace of tendering but progress on actual execution would require the government to address the various issues that are currently hampering execution such as delays in land acquisition and in obtaining clearances and approvals,” said Rohit Inamdar, senior vice-president, corporate ratings, ICRA.
The new awards will be made under the new EPC Model Contract, which gives the construction industry more space than they used to get under the earlier contracts. “This will make more companies interested in the EPC projects,” the Mumbai based analyst said.
NHAI officials too cited lack of response in the build, operate and transfer mode of projects this year. Last fiscal, many projects were aggressively bid on premiums but financial constraints have made the construction industry careful this time. “Project developers are facing delays in achieving financial closure for PPP projects due to increased due-diligence by lenders which is a result of weaker-than-projected performance of many operational PPP projects and aggressive bidding done by the developers in the recent project awards,” Inamdar added.
