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States pip NHAI in PPP road projects

Anirban Chowdhury  |  New Delhi 

Companies find the terms in the bidding documents for state projects much more attractive.

National highway projects under the public-private partnership (PPP) scheme have found few takers, but state highway projects under the same route are getting record response in Gujarat, Andhra Pradesh, Karnataka and Haryana.

Karnataka, which is offering 22,000 km of roads for development, received response from over 30 companies in the pre-bid conference held on February 28.

Andhra Pradesh has received 20 bids for its project to develop three road stretches totalling 450 km and involving an investment of Rs 2,000 crore.

Gujarat has received 46 bids from 19 companies for its 637-km project involving an investment of Rs 1,540 crore. The interested parties include biggies like Reliance Infrastructure, GMR group, Gammon India, HCC and Shapoorji Palonji. Unlike the other National Highways Authority of India (NHAI) and state projects where the developer recovers his cost by collecting a toll from passengers, the developers here will recover the cost through periodical annuity payments from the state government.
 

STATES VS NHAI
* Karnataka government has a road development project covering 22,000 km. As many as 30 companies are understood to have shown interest in the pre-bid meeting held on Saturday
* Andhra Pradesh’s Rs 2,000 crore project for developing three road stretches covering 450 km has received 20 bids
* Gujarat’s Rs 1,540-crore project has received 46 bids from 19 companies
* Out of the 37 projects of the NHAI for which bids were invited, 15 received not even a single bid

In comparison, out of the 37 projects of the NHAI for which bids were invited, 15 received not even a single bid, while of the 22 which did receive bids, 7 got only one bid each.

The reason for the good response to the state projects: companies find the terms in the bidding documents for these projects much more attractive than those of the NHAI.

One main attraction in the state projects is assurance of land. For example, under the Gujarat State Highway Development Project, the developer is assured that 95 per cent of the land will be made available to him at the beginning of the project by the state government.

“In the NHAI projects, it is mandatory to provide only 50 per cent of the land at the beginning of the project. In the Gujarat project, the availability of land is as high as 80-90 per cent... this makes companies more confident about bidding for the project since land acquisition is a key concern among developers,” said Suresh Krishna, COO, India Infrastructure Initiative, a joint venture between IDFC and Feedback Ventures.

The Andhra Pradesh project, for instance, while taking a leaf out of the Planning Commission’s guidelines for PPP bidding, has done away with the clause of selecting only six top ranking companies based on criteria like experience and technical expertise for the financial bidding process. Instead, all companies which technically qualify for the project are shortlisted for financial bids.

Besides, Andhra Pradesh has also done away with the clause that makes it mandatory for the developer to put in an additional capital if the actual traffic on the highway exceeds the estimates before the concession period is over. “In NHAI projects, if the concession period is 12 years and the traffic estimated by the end of 12 years exceeds that limit in eight years, the developer has to put in an additional investment to expand the project to meet the new demand. Therefore, he earns no benefits due to the additional traffic. But this clause has been done away with in the Andhra Pradesh project,” said a source close to the development.

The Karnataka highway project also has goodies in store for the developers that are not offered by the NHAI. “It envisages, among other things, award of land pockets to the developer to set up roadside amenities like restaurants, which would be a source of ancillary revenue to the company,” said PV Ravi, CEO, Infrastructure and Development Corporation, Karnataka.

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First Published: Wed, March 04 2009. 00:24 IST
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