High Time To Market Highway Sector Returns Potential, Feel Govt

The government has realised that private investment in the highway sector has not been up to the mark despite a rich package of incentives and concessions. This is mainly due to the lack of marketing efforts.

Official and non-official sources feel it is high time that marketing was given a high priority and a campaign launched, both at home and abroad, to educate investors and the financial institutions on the economic returns and the safety of investing in the highway sector.

Recently a high-level delegation headed by the cabinet secretary, T S R Subramaniam visited the US to attract foreign investment to the infrastructure sector.

 

The surface transport secretary, Yogendra Narain, a member of the team, says he found the US companies were largely unaware of the concessions the Indian government was offering to encourage private investment in the road/port sector. Narain said a lot still needs to be done to bridge the communication gap.

A good number of the construction equipment of US firms were lying idle for want of enough work, he said. As government has exempted construction equipment from import duty, these companies will find good use for them by investing in India, he said.

The government's assurance that the new policies aim at securing a 20 per cent minimum return on investment, has thrilled the US investors and have made them inclined to bring capital to the country. A high-level delegation of transport companies will be coming to India in next two or three months to discuss the issues in detail with the concerned authorities, he informed.

He said the US firms were concerned about how the Indian government was going to protect their investment against foreign exchange fluctuation risk. Narain explained to them how this aspect has been taken care of by indexing the toll rates to the whole sale price index in India and the experience over the years is that this neutralises the adverse impact of rupee in dollar terms if rupee depreciates. The toll rates to meet the objective will be revised every three years.

However, the state-owned National Highway Authority of India (NHAI), the nodal authority for national highway development, is of the view that even though there has not been proper marketing support to sell the schemes, the response so far has been good.

What is now needed, after the policy formulation work is over, is to project the policies, the programmes and the schemes," says NHAI's member (investment) R L Kaul.

Giving an example of the favourable response, Kaul said as many as 27 private investors had bought the expensive bid documents--each costing $1,000 ( Rs 35,000)-- for the three big BOT-based highway projects which were recently tendered.

The projects are the Jaipur-Kishangarh project in Rajasthan (60 kms) and the Hosur-Krishnagiri (93 kms) and Chingelpet-Tindivanamon (55 kms) project in Tamil Nadu. The deal involves upgrading the existing highways from two to four lanes. He emphasised that the schemes were tendered even before the latest incentive package was announced.

So as to attract new investors, the NHAI has revised the closing dates for purchase of bid documents and submission to July 11 and August 11 respectively.

The commissioning of the BOT-based, 27-km long Thane-Bhivandi bypass, which has been upgraded from two to three-and-a half lanes, is another example, he added. The act permitting the private sector to collect toll on roads was amended in June, 1995.

The contract was awarded in October, the same year and the project was commissioned on June 11. This was the country's first BOT project in the private sector, he added.

S Sen, senior director, the Confederation if Indian Industry, and K J S Ahluwalia also held identical views.

" The government's role is not positive. The bureaucracy is still old-fashioned. The attitude must change," Ahluwalia said.