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The road sector, under stress due to lack of private-sector participation, is likely to get a regulator next month. The roads ministry is expected to present the Regulatory Authority for Highways in India Bill, 2013, before the Cabinet soon.
The roads ministry has sent the Bill to other ministries concerned for comments, expected in the coming weeks. The setting up of an independent regulator, who is expected to resolve various contract disputes and renegotiate future contracts, is a long-standing demand of the industry. The expected timeline given by Union roads minister Oscar Fernandes, December 2013, has also passed.
“We are awaiting recommendations from the ministries soon and then we are looking to take it to the Cabinet next month. Through an executive order, the regulator can be put in place and can start work soon. We can seek Parliament’s approval after that, since it takes time for the Bill to be passed,” a senior roads ministry official told Business Standard.
The roads regulator is expected to find solutions to a number of road projects, which have been held up due to litigation and arbitration. Officials expect that projects worth Rs 20,000 crore can be kick-started if the regulator has its way.
The regulatory body will have adjudicatory powers across areas such as contract dispute resolution, renegotiation of future contracts and enforcement of contractual provisions. In his Budget speech last year, Finance Minister P Chidambaram had proposed an independent regulator for the roads sector, but the Planning Commission said there was no need for an industry regulator.
However, some industry experts were skeptical of the move, pointing to the timing of the setting up of the regulator - just before the term of the current government comes to end. “Setting up of a regulator takes time. Even if they get the Cabinet’s approval, they will eventually have to pass it in Parliament and we will have to see if the next government agrees to the role of a regulator. The need for a regulator has been a long-standing demand of the industry", said M Murali, director-general of National Highway Builders Federation.
India’s road sector has been struggling for the past few years with the government managing to award only 500 km of road projects in 2013, largely due to lack of interest from the private sector. Private-sector companies have been staying away from road projects for the past year, citing a lack of funds. In addition, they have also been seeking a rescheduling of the premium that companies owe the National Highways Authority of India (NHAI). The NHAI was forced to cancel six projects due to land acquisition hurdles in various states.
Road developers led by GVK, GMR and L&T have been seeking a rescheduling of the premium payable to NHAI to free up funds to be made available for other projects in India. Private developers owe the government close to Rs 1. 51 lakh crore to be paid over the next 20-25 years.
STRESS BUSTER
The roads sector has been bogged by several issues, including lack of interest from the private sector.
- 500 km - Length of road projects awarded in 2013 due to lack of interest from private sector
- Rs 1.51 lakh crore - Premium private players have to pay government over 20-25 years
- Rs 20,000 crore - Worth of projects that can be started if regulator has its way
- ... resolve contract disputes and renegotiate future contracts
- .... find solutions to projects held up due to litigation and arbitration; Rs 20,000 cr worth projects can start if regulator has its way
- ... have adjudicatory powers in enforcement of contractual provisions
