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The ministry of road transport and highways wants the share of PPP in the projects, awarded by National Highways Authority of India (NHAI), to be brought down to 30 per cent from 48 per cent recorded during the peak time, according to a senior government official.
“Over-dependence on the private sector is one of the major reasons for slow growth in the roads sector, as many projects get stuck due to one issue or the other. The private sector should not have a primary role in the roads sector,” the official said. This was conveyed to roads minister Nitin Gadkari as well in a recent meeting with ministry officials. However, President Pranab Mukherjee, in his address to the joint session of Parliament, said, ”Lack of robust infrastructure is one of the India’s major impediments...A fast track, investor friendly and predictable PPP mechanism will be put in place.”
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During 2013-14, the ministry could not award even a single project through this mode, while 2,500 km were awarded under the engineering-procurement-construction (EPC) mode. The government could not award about 20 projects that were put up for bidding under the build-operate-transfer mode the same year, as there were no takers from the private sector. It now plans to change the mode of the projects after necessary approvals and start the projects through government funding. Currently, road projects worth Rs 83,000 crore are pending completion.
Since 2009, when the United Progressive Alliance (UPA) government’s second term in office began, private sector operators operationalised only three projects, adding just 315 km to the existing highway network, despite award of a record 147 projects under the public-private-partnership (PPP) mode, with a combined value of Rs 1.47 lakh crore. For 2014-15, the plan is to award 4,000 km on the EPC mode and if things get back to normal, another 7,000 km in the BOT mode would be awarded.
Road secretary Vijay Chhibber had in May told Business Standard: \”We have no plans to award BOT projects this year (2014-15) and we hope the environment will be better the next financial year. But that does not mean an end to BOT projects.\” After the initial euphoria, private investors have been shying away from bidding for the projects.
The economic slowdown coupled with land acquisition and environmental clearances besides funding issues have soured the government’s dream of private partnership. Due to the slowdown, there is slow growth in traffic as well, mainly in commercial traffic, according to the official in the ministry, due to which the initial assumptions by developers on the revenues in the projects went haywire.
According to estimates, the government would now have to spend about Rs 40,000 crore to develop roads through the EPC mode. Unlike the BOT model, the government funds the entire project under EPC and a developer undertakes the necessary construction work.
BOT requires a private-sector developer to raise and invest money for the construction of roads at its own risk, while NHAI acquires land for the project. Many of the private projects such as Delhi-Gurgaon and Delhi-Jaipur expressways have led to problems between the government and concessionaires. And more so, the government had to reschedule premiums, which developers pay to NHAI over a period of time, through a new policy due to funding problems and economic slowdown.
