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IRB Infrastructure Developers has bagged a project from the National Highways Authority of India (NHAI), a year after the Centre had awarded a road stretch to be built through a public-private partnership (PPP).
The project has been awarded after the government agreed to provide a grant, or viability gap funding, of Rs 558 crore to the developer for the Rs 3,200-crore project in Maharashtra. In viability gap funding, the Centre will meet up to 20 per cent of the cost of the project as it may not yield the projected financial return to the private developer.
The NHAI has awarded the widening of 190 km of the Yedeshi-Aurangabad section of National Highway 211 in Maharashtra into four lanes. To be executed as a build-operate-transfer project, its construction period is 910 days and the concession period is 26 years, according to a press release by IRB Infrastructure Developers issued on Tuesday.
Between 2008 and 2011, when road making saw a boom, 147 projects were awarded as PPPs, a third to companies that offered to pay a premium. The premium is the amount companies offer the government as they expect projects to generate high revenues. The high expectation in bids for road projects was attributed to India's rapid economic growth, slowed considerably over the past few years. So far, companies have managed to complete three such projects.
Abhaya Agarwal, partner at EY, a tax and audit consultancy, said, "The government has always been willing to award road projects but developers have been overambitious. A sense of sanity has come to developers. We could see many more projects being awarded," said .
Last year, the road ministry had scrapped plans to award road projects when it found no takers for partnership and tried to award these as engineering, procurement, construction contracts funded by the government. This year, the National Transport Development Policy Committee, headed by former Reserve Bank deputy governor Rakesh Mohan pegged the private investment needs in roads at Rs 6.65 lakh crore over 20 years. This translates into Rs 33,250 crore a year, less than the total value of projects awarded through PPPs in 2010.
IRB had applied for rescheduling of the premium for two projects after the government allowed road developers to do so. According to a suggestion by a panel headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, road developers facing a severe shortfall in toll can avail the scheme. The premium is to be rescheduled if developers are unable to service their debt, operating expenditure and the payment of premium. If the projected toll revenue falls short of the cost plus premium, the government will consider the deferred amount as a loan to the developer.
The project has been awarded after the government agreed to provide a grant, or viability gap funding, of Rs 558 crore to the developer for the Rs 3,200-crore project in Maharashtra. In viability gap funding, the Centre will meet up to 20 per cent of the cost of the project as it may not yield the projected financial return to the private developer.
The NHAI has awarded the widening of 190 km of the Yedeshi-Aurangabad section of National Highway 211 in Maharashtra into four lanes. To be executed as a build-operate-transfer project, its construction period is 910 days and the concession period is 26 years, according to a press release by IRB Infrastructure Developers issued on Tuesday.
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Between 2008 and 2011, when road making saw a boom, 147 projects were awarded as PPPs, a third to companies that offered to pay a premium. The premium is the amount companies offer the government as they expect projects to generate high revenues. The high expectation in bids for road projects was attributed to India's rapid economic growth, slowed considerably over the past few years. So far, companies have managed to complete three such projects.
Abhaya Agarwal, partner at EY, a tax and audit consultancy, said, "The government has always been willing to award road projects but developers have been overambitious. A sense of sanity has come to developers. We could see many more projects being awarded," said .
Last year, the road ministry had scrapped plans to award road projects when it found no takers for partnership and tried to award these as engineering, procurement, construction contracts funded by the government. This year, the National Transport Development Policy Committee, headed by former Reserve Bank deputy governor Rakesh Mohan pegged the private investment needs in roads at Rs 6.65 lakh crore over 20 years. This translates into Rs 33,250 crore a year, less than the total value of projects awarded through PPPs in 2010.
IRB had applied for rescheduling of the premium for two projects after the government allowed road developers to do so. According to a suggestion by a panel headed by C Rangarajan, chairman of the Prime Minister's Economic Advisory Council, road developers facing a severe shortfall in toll can avail the scheme. The premium is to be rescheduled if developers are unable to service their debt, operating expenditure and the payment of premium. If the projected toll revenue falls short of the cost plus premium, the government will consider the deferred amount as a loan to the developer.
