The leisurely evening walk that the National Highways Authority of India (NHAI) got used to in the past five years is set to take on the speed of a 100-metre sprint under a new coach.
Less than two months into his job, Union Minister for Road, Transport and Highways Kamal Nath has already embarked on roadshows to hardsell his grand plan to construct 20 km of highways a day, a five-fold increase from the current pace of 4 km. The first such show was in Singapore last week. The minister plans to launch similar initiatives in the US and Europe as well. His pitch being that India’s roads sector presents great potential, with a projected traffic growth of 7 per cent and vehicle growth of 12 per cent per annum.
After a rather sedate five years, NHAI is trying hard to keep pace with the minister, who is in a hurry to leave his footprint on the country’s highway map. It has already come up with a plan to offer 14,395 km of roads for 2009-10, the bids for which would be invited shortly. Over 60 per cent of this will be toll roads, the rest being on annuity and engineering procurement construction basis.
In a move to attract private sector bidders, NHAI has also restructured the cost of about 35 projects across the country via elimination of flyovers and service lanes. The reduction of costs has been quite dramatic: for example, the cost for developing the Belgaum-Dharwad highway has gone down by almost 40 per cent from the original estimate to Rs 480 crore.
The authority has also finalised plans to build 1,100 km of expressway in four stretches: Kolkata-Dhanbad, Vadodara-Mumbai, Delhi-Meerut and Chennai-Bangalore. All these will be on public-private partnership (PPP) basis, with the state governments’ active participation. The proposed Expressway Authority is expected to be in charge of these expressways.
Since land acquisition is a key problem area, NHAI is in the process of creating 150 land acquisition wings at the state-level. Moves are also afoot to increase the number of NHAI employees from the current 800, who oversee 66,000 km of highways. The Authority is also looking into the problems faced by developers by bringing in measures like suitable exit clauses.
The total fund-raising requirement of the Authority would be Rs 90,000 crore till 2017-18. But experts said money wasn’t an issue. The minister has already gone on record to say that NHAI collects Rs 1,800 crore revenue that can be securitised.
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“Money will not be a problem. As many projects are to go on PPP, the government does not have to arrange the full money. And there is enough liquidity in the market for the private contractors to arrange money,” Parvesh Minocha, managing director (transportation division), Feedback Ventures, said.
Pradeep Singh, vice-chairman & managing director, IDFC Projects, agreed. “Funds can be arranged, though it would require a lot of efforts such as leveraging private funding and borrowing from the market,” he said.
A beginning has been made. The biggest problem, experts said, was NHAI itself. The authority has a rather poor record. For example, it did not invite any bids for nine or 10 months in 2008, but bunched a large number of these in December 2008, when the global financial meltdown was at its peak. Given the unsustainable project costs and the financial crisis, lack of bidder response was entirely predictable.
Also, in recent years, NHAI has built four-lane highways where traffic for the next decade will only require two lanes. This means an investment of over Rs 5 crore per km will lie idle. With the same money, several thousand kilometres could have been upgraded across the country. So the urgent need was to create more bankable projects, Gajendra Haldea, principal advisor (infrastructure) in the Planning Commission, said.
Analysts and NHAI officials also said fundamental institutional changes had to be made in NHAI to deal with key issues which have jeapordised project timetables in the past. For example, inability to acquire land for a project on time, leading to disputes between the NHAI and concessionaires, blocking of contractors’ money and arbitration and legal cases, and changes in the design of highways.
Disputes between NHAI and contractors have also led to over Rs 10,000 crore of the latter’s money getting stuck in legal wrangles, delaying project completion. M Murli, director-general of the National Highway Builders Federation, said, “Though 90 per cent of the arbitration cases have been won by contractors, NHAI has not accepted them and have challenged them in courts.”
Analysts also said frequent changes in the design were a major problem.
“It is eminently possible to achieve that target. The private sector in India has the requisite capabilities to deliver even more, but this would require NHAI to be institutionally strengthened. NHAI must standardise the bid processes and hasten project awards, make available 80-90 per cent of the land to the concessionaire a-priori and work with state governments to facilitate site-level issues like utility shifting for this target to be realised,” said Sanjay Sethi, executive director and head of infrastructure, Kotak Investment Banking.
Many analysts also said there might not be enough qualified contractors to do the job. But NHAI Chairman Brajeshwar Singh disagreed with that. “By and large, I think, contracting capacity will not be an issue. We have enough number of contractors for an ambitious target like this,” he said.
But the NHAI chairman is aware of the problems and hence is slightly more realistic than the minister. “Taking road construction from four to 20 km a day will not be an easy task. But we are looking at growing slowly. In the first year, we plan to build 8 to 10 km and then plan to raise it to 20 km a day in 12 to 18 months,” Singh said.