Highway projects reach a fork in the funding road

Debt-laden private promoters shy away, but government keen on fast tracking

A few months ago, the Union ministry of road transport and highways sent a list of some 100 projects to the Project Monitoring Group (PMG) in the government asking it to help fast-track construction of these stalled highway projects. This was something unusual. PMG in normal course takes up projects enrolled on its portal by promoters themselves.

In some of these cases where projects were privately funded, the promoters were not interested in getting out of the logjam, said a senior government official. It was the National Highways Authority of India (NHAI) and the ministry that wanted the stuck projects to get moving. The problem is obviously more than just government clearances here.

 

While 24 projects covering 2,710 km out of the 77 languishing projects running 8,400 km have been revived, the Prime Minister's Office (PMO) takes up two highway projects every week for a detailed review, since road construction is a priority under the NDA government. Issues were being sorted out in another 18 projects covering 1,508 km, but a startling 35 projects covering 4,190 km were terminated.

According to S N Das, director general, road development and special secretary to the government of India, ministry of road transport and highways, road projects were stuck mainly because of problems in land acquisition, lack of environmental clearances and unfavourable market conditions. "To some extent, constraints faced by the concessionaire in raising funds is also one of the reasons which stalled projects awarded to them. But now things have started moving because of the proactive steps by the central government," he said.

Procedures relating to land acquisition and statutory clearances have been streamlined. Projects are now awarded after acquiring land and obtaining all regulatory approvals for a project to avoid post-bid delays and litigation. Besides, the government has decided to adopt new variants of PPP model like Hybrid Annuity Model (HAM) to attract bidders for new projects, besides build-operate-transfer (BOT), and engineering, procurement and construction (EPC).

For the Indian railways, the other important arm of transport infrastructure, the approach has been slightly different. The railways got cracking on projects that were stuck in insurgency and extremism-hit terrains, and even the hugely delayed Dedicated Freight Corridor (DFC) project. The fact that the railway sector is government-funded, and a host of projects were announced every year, had added to the problems, but with Railway Minister Suresh Prabhu announcing no new projects this year, funds are expected to be spread across projects more wisely.

In the highway sector, industry representatives and experts say attracting private investment has been a struggle for nearly three years due to an economic slowdown and fall in traffic projections that affected revenue. "Road projects were stalled mainly on account of land acquisition problems and finance problems being faced by the developers," said a senior executive from a private company, on condition of anonymity. His firm projects were also stalled due to these reasons.

Last year in July, Union Minister of Road Transport and Highways Nitin Gadkari said as many as 189 projects with a cost of Rs 1.80 lakh crore were stuck due to problems in land acquisition, delays in forest and environment clearances, non-transfer of defence land, and hurdles in rail overbridges.

The number of stalled projects in the railways is, however, less at about 24, with each worth Rs 1,000 crore. The railways has successfully resolved all issues on the Rs 6,699 crore and 625 km long corridor (Rewari-Iqbalgarh) under Phase I of the western arm of Dedicated Freight Corridor Corporation (DFCC), until recently, the largest of the stalled rail projects.

Besides, Dedicated Freight Corridor Corporation of India (DFCCIL), the Special Purpose Vehicle (SPV) implementing the overall Rs 81,000 crore DFCC project, had awarded its first contract for the western freight corridor worth Rs 6,699 crore to a consortium led by Japanese company Sojitz Corporation for the 640 km project between Rewari and Palanpur, which is part of the first phase spanning 920 km from Rewari to Vadodara.

The length of the project alone accounted for 40 per cent of the total 1,490 km long western DFCC between Dadri in Uttar Pradesh and JNPT in Mumbai. With all the issues now resolved, the corridor is expected to be commissioned by September 2017. "We awarded Rs 4,000 crore contract last year for electrification between the Rewari and Vadodara stretch. Overall, we will award nine contracts worth Rs 18,000 crore for the western DFCC this financial year," DFCC Managing Director Adesh Sharma told the Business Standard.

The PMG data also showed the government has resolved the issues hurting the development of the Rs 4,444 crore and 211 km long Jiribam-Imphal new line project in Manipur. "The line will provide connectivity to Manipur, which is severely affected due to insurgency. The project has been declared as a national project, and is being monitored at the highest level. To create a conducive environment, special battalions of CRPF have been deployed," PMG said in its report on stalled projects.

Among the other stalled railways projects which have witnessed progress lately are the Rs 4,255 crore and 482 km long Lumding-Silchar gauge conversion project. It will provide seamless connectivity to lower Assam and Tripura, Mizoram and Manipur with the rest of India, and is also a vital link for new line projects providing rail connectivity to state capitals in the north-eastern region, according to PMG.