In a record of sorts, the National Highways Authority of India (NHAI) has bid out its first mega project at a premium income more than the total cost of the project. Bangalore-based GMR Infrastructure has bagged the Kishangarh-Udaipur-Ahmedabad project, outbidding 10 companies, for which it will pay the government Rs 636 crore annually over 26 years.
The money the government will make in the process will be more than the project cost of Rs 5,500 crore. Quoting premium amounts to committing an annual payment to the government over a period of time, instead of seeking a grant for building the road. Companies bid premium if they are confident that the toll revenue accruing to them would more than offset their costs.
Among the major bidders in race were L&T Infra and a host of consortia led by GVK, Reliance Infra, IRB Infra and HCC Infra.
The project comes under the fifth phase of the National Highway Development Programme, which is widening the existing Golden Quadrilateral to six lanes from four. “We are passing through a brilliant phase where more and more road projects are being bid out on huge premium. This is the first time we have bid out a project on a premium that will return more than the project cost,” said a senior NHAI official, who did not want to be identified.
NHAI got premium on a few other projects though it had not expected so.
Among the projects that attracted premium are the Hospet-Bellary-Karnataka/Andhra Pradesh border section (Rs 18 crore annual premium) and the Chhattisgarh/Orissa border-Aurang section, which was expected to be awarded on a grant, on a Rs 29-crore annual premium.
Infrastructure companies, while accepting the increase in demand for highway projects, say that construction projects in promising sectors like power have dried up forcing them to shift to highway building. This shift has also led to companies putting in aggressive bids in order to bag projects, making the government a beneficiary of the shift.
The companies explain that the power sector was no more lucrative since governments do not allow a higher tariff even though fuel costs had increased. Airport, railways and shipping are not offering much for the private sector.
Such is the competition that NHAI projects, which earlier attracted up to 20 bidders at the qualification level, are now getting up to 40 bids.
In the current financial year, NHAI has announced to award 59 projects covering 7,994 km with a total cost of around Rs 60,000 crore. However, the government feels that the demand is huge and they aim to award more than the set target. “We have set a target but that does not mean that we cannot increase it. We plan to award more than the target and we are moving towards that,” said Union Road Transport Minister C P Joshi.
