In what spells trouble for the infrastructure sector, around Rs 25,000-crore highways projects are awaiting funding and seeking extension of financial closure deadline. These projects constitute 23 packages and comprise 2,500 km of construction.
The project award pace of the National Highways Authority of India (NHAI) has also slowed down with just over 600 km of highway projects awarded in the first half of the financial year against the ambitious target of 9,500 km set by the prime minister, said Minister for Roads and Highways C P Joshi.
A senior NHAI official said the extension was being sought due to various reasons like land, environment and other such clearances. A company gets 180 days to financially close a project. If it is unable to do so, it gets a grace period of 120 days, with a penalty.
If the company is still unable to complete it, the project award is cancelled. It is either rebid or awarded to the second lowest bidder. Though so far only two contracts have been cancelled, all 23 projects that are seeking extension are in the grace period.
Speaking at the Economic Editors Conference, Roads and Highways Secretary A K Upadhyay said there were challenges in the public private partnership (PPP) projects this year on various clearances as well as finance. These projects are all four-lane projects awarded last year. The cost of construction in these projects is Rs 10 crore per km, said the official.
NHAI awarded 62 projects covering 7,957 km last financial year, many of which were bid at a premium. Two projects, worth about Rs 2,450 crore, awarded last year to DSC Ltd and Gannon-Dunkerley Co Ltd were terminated after failure to achieve financial closure. This was the first time that such termination had to be done due to failure of companies to make financial closure.
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Earlier this financial year, a meeting was arranged by the ministry of roads, where officials from the construction and banking sectors, as well as the government, discussed the problems facing the sector, including financing issues.