Bids for road projects worth Rs 17,000 crore likely by October-end

October 10, 2013


By October-end, six annuity projects worth Rs5,784 crore and four toll-based projects worth Rs11,274 crore will be opened for bidding.

(By October-end, six annuity projects worth Rs5,784 crore and four toll-based projects worth Rs11,274 crore will be opened for bidding.)
NEW DELHI: Road projects worth Rs17,000 crore are to be awarded in the next five weeks after nearly 18 months of muted activity. The fate of these projects would be a good indicator of private investors’ willingness to bet on the government’s renewed push to infrastructure sector in recent weeks.By October-end, six annuity projects worth Rs5,784 crore and four toll-based projects worth Rs11,274 crore will be opened for bidding.

This also includes the Rs9,654-crore Agra to Lucknow eight-lane expressway project, which will be implemented by the Uttar Pradesh Expressways Industrial Development Authority (UPEIDA).

“This can be a good barometer to judge the market sentiment. There are people who are hungry, but only financially viable projects which have land and requisite clearances in place will find takers,” said Abhaya Agarwal, Partner and Leader, PPP, at EY.

The pace of award of highway projects has been slow because of issues like poor market sentiment, shortage of equity, lenders’ demand for 100% possession of land, delays in getting clearances, banks reaching their exposure limit towards the infrastructure sector and a ban on quarrying of stones and minig of ordinary earth used in road construction.

This year the National Highways Authority of India (NHAI) has awarded only 479 km against its target of 3,000 km by September. In the previous financial year, projects for only 1,116 km were awarded against the target of 9,500 km.

However, Shravan Shah, senior research analyst at The Market Financial Intelligence, is optimistic. “The projects being opened for awarding could bring a ray of hope.

Most of these projects including those in Assam, J&K as well as the Agra-Lucknow expressway are largely ready and there is a high chance that developers would pick them up,” said Shah.

The drastic slump in market sentiments prompted Prime Minister Manmohan Singh to address things personally. The PM promised to kickstart several stalled infrastructure projects worth Rs 1.5

lakh crore including two new ports, eight new airports, new industrial corridors and rail projects. “We have recently taken many steps to speed up the process of government clearances for industry, build an environment more conducive to trade and industry and increase investment in the economy.

A special cell has been set up to help big projects with clearances. The Cabinet Committee on Investment is working to remove hindrances in the way of stalled projects,” said the Singh in his Independence Day speech, adding that investments would increase because of these efforts in the coming months.

Bids for road projects worth rs 17,000 crore likely by Oct-end

Several of the issues have been addressed with the government allowing de-linking of environment and forest clearances, relaxations on mining of ordinary earth and so on. It has also approved policy changes allowing stressed developers to fully exit highway projects.

“At this point, developers are looking for a balanced portfolio with a mix of toll-based and annuity-based projects. Toll-based projects have risks involved including traffic projections not matching the actual.

Annuity on the other hand, means assured payments,” said a senior official from an infrastructure major, adding that private players have lost their appetite and would only take up projects after doing a proper assessment on the viability.


Share your comments here: