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IRB Infrastructure says the Centre’s slew of initiatives have partially removed several roadblocks. However, toll collection and land acquisition need to be addressed fully. In an interview with Sanjay Jog, IRB Infrastructure Chairman and Managing Director (CMD) Virendra Mhaiskar explains the company's strategy
The Centre plans to award Rs 3 lakh-crore worth road projects in six months. How is IRB prepared to be a part of the initiative? What will be the worth of the projects to be taken up by the company in the current financial year and the following two years?
IRB is fully equipped to participate in the initiatives of the government. We have been qualified in the RFAQ (annual qualification) for bidding in single build-operate-transfer (BOT) projects worth Rs 5,705 crore each. We are also qualified to bid in single engineering, procurement, construction (EPC) projects worth Rs 2,522 crore each and single operate-maintain-transfer (OMT) projects worth Rs 4,995 crore each. At any point in time, we should not have more than three successfully bid projects where financial close is not achieved according to the present bidding criteria of National Highway Authority of India (NHAI). This means we can take up maximum of three projects amounting to approximately Rs 16,000 crore at a given time.
In the current financial year, we have already been declared as the preferred bidder for the Agra-Etawah project of NHAI worth approximately Rs 2,500 crore. We plan to take up two more projects of similar cost. In the next two financial years, our target is to pick projects worth Rs 7,500-9,000 crore each year.
What is the present status of IRB’s projects?
Of a total portfolio of 22 projects, 16 are operational and six are under various stages of implementation. All our projects are located in peaceful geographies and hence hindrance to toll collection have been minimal. Traffic projections were considered by us within logical limits and also, most of our projects are in busy traffic corridors such as NH-4 and NH-8. Hence, even when there was an economic slowdown a few years ago, our revenues were not much affected. From hereon, we expect an average traffic growth above six per cent across most of the national highways over the next six-eight years.
Has the government been able to remove roadblocks to push implementation of roads and highways projects?
Yes to a certain extent. NHAI is now floating tenders only after 90 per cent land acquisition is in place and environmental clearance has been obtained. However, the only roadblock per se is the uncertainty looming on the hindrance-free tolling once the project gets completed. The government needs to decide, once and for all, as to who all would be fully exempted from paying toll because if this decision comes after award of projects, the investors’ expectations from the contracts go for a toss.
With land acquisitions and environment clearances to be government’s responsibility, the Centre says there’s very low risk for private contractors. Do you subscribe to the minister’s views?
Land acquisitions and project clearances have always been government’s responsibility. However, the delays in achieving these tasks by the government was the cause for serious concern. Even though 85 to 90 per cent land is made available now, the balance land is not available on time and concessionaire is not compensated fully for this delay. The only saving grace is that NHAI has been granting permission for commercial operation even if some part of the work is left incomplete for reasons not attributable to the concessionaire.
The Centre has set an ambitious target of per day road construction of 30 km in the next two years. Do you feel is it achievable or is it a mere slogan?
We feel NHAI would be in a better position to respond to this one because while we can comment only on the project being executed by us, exact update on other projects can be provided by NHAI only.
Further, the Centre has introduced the hybrid annuity model that reallocates the risk-sharing of road construction. What is your take?
Hybrid model is only another model for financing of projects. It does not have any impact on the speed of construction as such. This model is formulated for marginally viable projects. It is a grant cum annuity kind of model where the developer takes only the construction risk whereas the traffic risk is taken by NHAI.
