At a time when the Prime Minister's Office (PMO) has stepped up tracking the progress in award and implementation of infrastructure projects, the road ministry and the National Highways Authority of India (NHAI) have decided not to award any new highway projects until November.
The reason: financial stress at potential bidders, non-availability of land and uncertainty over securing environment clearances. The virtual suspension of bidding follows a steep decline in award of new projects. Awards of build-operate-transfer (BOT) highway projects which had peaked in 2011-12 at 6,491 km saw a dramatic decline to 1,116 km in 2012-13. This year, clearly, is going to be worse.
Government sources and officials from developers like Soma Enterprises and Reliance Infrastructure separately confirmed to FE that no new projects were likely to be awarded till close to the end of 2013. “The bull run in the highway sector is over. There are no takers for any new road projects,” said DV Raju, vice-president, National Highway Builders Federation.
A senior NHAI official said: “We are not ready to launch any bid on the engineering procurement and construction (EPC) mode nor the BOT mode as of now. Developers are cash-strapped and the investment climate is not conducive enough. We don't want to launch bids in a hurry in a bad market.”
Developers feel the government must prepare detailed project reports and traffic studies to attract the right bidders and take steps to prevent long-pending arbitration cases, high interest rates and falling toll collections hindering projects.
“The market scenario is not good. Highway developers have had several communications with the roads ministry and the NHAI has highlighted the problems faced by developers.
Land acquisition and banks' reluctance to lend are major concerns. Until these issue are resolved, the highways sector is unlikely to look up,” Sudhir Hoshing, CEO Reliance Infrastructure said. Government sources, however, said the authorities would ensure that developers do not face problems and address their concerns at the earliest. The government is disturbed by rising incidents of developers unable to achieve financial closure and walking away from contracts. NHAI has been encouraging builders not to abandon projects and complete the contracts, these sources said.
“We are working towards organising the back-end work including minimum of 80% of land acquisition and environment and mining clearances. Until we meet all necessary requirements, we won't be in a position to award any new project either on EPC mode or the