The ministry of road transport and highways (MoRTH) and the National Highways Authority of India (NHAI) have readied a backup plan for the 23 stranded highway projects for which premium rescheduling was approved by the Cabinet Committee on Economic Affairs (CCEA) in October. Under the plan, these contracts — most of which have anyway become infructuous — would be cancelled and the projects would be bid out afresh as smaller stretches.
The move stems from MoRTH and NHAI’s worry that the terms of premium rescheduling being prepared by the Rangarajan panel might fail to lure existing developers to stay with the respective projects. The cumulative premium to be rescheduled is around Rs 98,000 crore.
According to senior officials, the NHAI will soon submit a proposal to the road ministry enlisting the break-up of the 23 projects. The proposal may need Cabinet approval as the premium rescheduling was earlier approved by it.
The dearth of new public-private partnerships in build, operate, transfer project awards has hit highway construction badly, even as the NHAI is trying to revive the engineering, procurement and construction model and has awarded 600 km of projects in this category by November-end. With traffic growth sluggish, raising equity difficult and bank funds not forthcoming, there has been tepid response to PPP projects offered by the NHAI this financial year. Just 222 km of projects have been awarded (including re-awards) against 1,116 km in FY13 and 6,491 km in FY12.
“Given that NHAI is getting good response from the investors and developers for smaller stretches, we are looking at this strategy and awarding these (23) projects in small bits,” an official said. The delay in premium rescheduling is affecting the performance of the NHAI and highway construction plans and hence, to get the construction work started, the only possible option left is to cancel these projects and award them in smaller stretches as per their viability, the official said.
Asked which would be the preferred mode of awarding, the official said it could be a mix of both EPC and BOT. "The government does not want to take a risk of BOT alone so if a BOT bid goes empty, then the EPC route will be taken to have the projects rolling," the official said.
One reason for taking the backup route is also to safeguard the interests of lenders. According to road ministry estimates, lenders’ exposure to these projects