November 5, 2013
By Vikas Dhoot & YASHODHARA DASGUPTA, ET Bureau |
NEW DELHI: Financially stressed highway developers seeking a bailout from the Centre will get to know by next month whether their demands are going to be accepted.An expert panel set up by the Cabinet under the Prime Minister’s Economic Advisory Council chairman C Rangarajan will examine whether any concession should be given to developers in the form of deferral of the premium payment they had committed to while bidding for the highway contracts.
The panel, expected to be formally constituted this week, will also consider the moral hazard of allowing such post-contract concessions that the highways ministry and National Highways Authority of India (NHAI) believe will benefit 40 stalled projects in this case.
“I am now studying the problem in terms of whether a) if any concession should be given at all, and b) if given, what form should it take and how should it work,” Rangarajan told ET. “Because it’s a post-contract concession, we will have to work that (moral hazard) out. We will have one month to submit our report from the time it is formally set up,” he added.
The government had decided to set up the committee under Rangarajan in October to work out the modalities of the highlycontentious bailout policy which has been discussed for much of the past year.
The Planning Commission and finance ministry had initially objected to the policy due to concerns over maintaining the sanctity of public private partnerships (PPP) and the potential moral hazard in renegotiating existing contracts.
Opinions between the highway ministry and NHAI are still divided. The highways authority has told the panel that the discount rate should be kept at 10%, no penalty should be imposed and no corporate guarantee should be taken from developers, a person familiar with the matter said.
The ministry, on the other hand, is in favour of a 12% discount rate as well as imposition of penalty, which was suggested by the finance ministry to avoid any undue advantage to a handful of developers.
Industry experts have, however, cautioned of the adverse impact the delay in decision-making would have on the already stagnant investment flows in the highways sector. “The more there is delay in taking a decision, the more it is unlikely to come about before elections.
At this stage, the committee should work on the modalities of the policy instead of going back to the basic question if this should be done at all.
A decision needs to be taken by December because once the results of the state elections are out, there will be political turmoil and a reluctance to take decisions,” said Vishwas Udgirkar, senior director at Deloitte, adding that the industry was unlikely to bid for new projects until the resolution of the issue since such a renegotiation could set a precedent for shaping future contracts.
According to a person familiar with the matter, Rangarajan has asked for inclusion of Planning Commission secretary Sindhushree Khullar, road ministry secretary Vijay Chhibber and PMEAC secretary Alok Sheel in the group, besides NHAI chairman RP Singh and expenditure secretary RS Gujral, whose names were included at the time the Cabinet Committee on Economic Affairs was deliberating on the matter.
November 1, 2013
Press Trust of India |
“CCEA approved four laning of the Aurangabad-Yedeshi section of National Highway-211 in Maharashtra under the National Highways Development Project (NHDP) Phase IV on Build, Operate and Transfer basis,” an official statement said.
The estimated cost, of the 190 km, project is Rs. 2,406.63 crore including the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities, the statement said.
The proposed highway between Sangrur (Punjab) and Haryana border is estimated at Rs. 612.28 crore including the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities.
The total length of the road will be approximately 57 km. The project is covered in Sangrur and Patiala Districts of Punjab. The main townships on the project Highway are Sangrur,Patran and Khanauri.
These two projects will also increase employment potential for local labourers.
October 17, 2013
Dipak Kumar Dash, TNN |
NEW DELHI: The Cabinet is likely to clear a proposal on Thursday for construction of a 15-km tunnel at Zojila pass in Ladakh region. Sources said that the proposal — put forth by the road transport and highways ministry — envisages construction of an all-weather road involving Rs 9,090 crore investment, ensuring undisrupted round-the-year connectivity between Ladakh and Srinagar.Highway ministry officials said that the construction of the tunnel will need at least seven years, and the contract for collecting toll will be for 15 years.
Congress vice-president Rahul Gandhi had promised to people of Leh and Ladakh to provide all-weather connectivity to the rest of the country during UPA’s rule. Last year, he had laid the foundation stone for the 6.5 km Z-Morh tunnel in this region involving nearly Rs 2,700 crore. This project is scheduled to be completed in five years. Sources said that the project developer, however, is yet to tie up funds for construction.
The Zojila pass is situated at an altitude of 11,578 ft on the Srinagar-Kargil-Leh National Highway (NH-1), which remains closed from December to April. It is not feasible to keep the road clear during winter due to heavy snowfall, and to make matters worse the area is prone to severe avalanches.
The project involves construction of a two-lane and bi-directional tunnel with an escape route. The project will be constructed on annuity mode, where government will pay back the private developer’s investment in installments once the stretch becomes operational.
October 10, 2013
By YASHODHARA DASGUPTA, ET Bureau
The highway ministry’s proposal on premium payments suggested giving the NHAI board liberty to develop parameters to select stressed projects that would benefit from restructuring the premium payments quoted when they had bid for the project. The move is expected to benefit lenders as they can now recover their dues first instead of competing with NHAI.
Persons familiar with the issue said the modalities of the policy still need to be worked out. It is likely that about 40 premiumbased projects awarded after April 2010 will be reviewed. However, these also include projects with premium as low as a few crores where rescheduling would not be of significance, as well as those where developers may no longer be willing to continue due to cost escalations.
“The decision will help build sentiment among investors and in the market. However, specific parameters need to be ascertained, based on which the appropriate projects can be determined,” said M Murali, director general, the National Highway Builders’ Federation. “It is possible that not all developers will opt for it. It all depends on how the policy shapes up.”
Under the revised tolling policy, for highway projects involving expansion from four lanes to six, developers can collect only 75% of the current toll amount during the construction period without the yearly escalation applied on toll rates. Only after the construction is complete can developers start collecting the full toll and at the escalated value.
Also, if a developer fails to complete the project on time, they will no longer be allowed to collect toll. This has been done with a view to compensate commuters during a time when highway quality is poor because of construction work, as well as to disincentivise developers from squatting on projects.
The proposal on tolling policy had also included suggestions like shifting from financial model to one based on physical features to decide if a highway stretch should be tolled, and barring overloaded vehicles from plying on national highways till they have off-loaded and a penalty ten times higher than the current penalty.
October 9, 2013
The Cabinet has approved premium rescheduling for highway developers, but with certain riders.
A senior official in the Highway Ministry said, “the approved proposal would require some more fine-tuning, which has to be thrashed out over the next few weeks by a committee.”
The Highway Ministry is awaiting the minutes of the Cabinet meeting to be able to clarify on the exact content of the approval given, as the proposal contained multiple options of premium rescheduling. Premium is the amount quoted by developers to the National Highways Authority of India to bag the rights to design, widen, finance, operate highway stretches and collect toll from the users over a long period of time.
The Government has been considering a proposal to permit highway developers to postpone their premium payments in a manner that the net value of these obligations are constant over the entire contract period.
Road developers had bagged many highway projects by quoting high premiums to develop or widen highway stretches, maintain these and collect toll from users over a pre-determined period of 20-30 years. Now, they want the projects’ premium payment postponed in a manner that the net value remains the same.
The proposal has been doing the rounds of various Ministries, including Law, Finance and Highways for several months now.
Government officials had been dragging their feet on the issue as the proposal involved re-negotiating contract terms already entered into.
“The premium rescheduling proposal was cleared in-principle. But, a scientific formulation to define stressed projects is required,” said another source.
In a related move, the Cabinet has cleared some toll charge related decisions, which will come into effect on a prospective basis. Simply put, these decisions will be implemented for projects awarded in future, another Highway Ministry source said.
But, in case of renegotiation of contracts, the National Highways Authority of India can use it as a tool. First, truckers who move overloaded cargo will be penalised by charging extra. Basically, the extra cargo will have to be removed from the truck and the trucker will have to pay ten times the pre-defined toll for that vehicle category.
Also, highway developers will have to charge a lower level of toll (75 per cent of pre-defined toll levels), in case they delay in completing projects. Additionally, for projects where two-lane highways with paved shoulders are getting made, developers can charge 60 per cent of toll, subject to the road being physically wider (by another three metres).
Another proposal – to decide the level of toll charges for greenfield expressways – has been referred to a committee headed by Finance Minister, Planning Commission Deputy Chairman and Highway Minister.
October 9, 2013
NEW DELHI: The Cabinet on Tuesday decided to allow developers to charge only 75% toll during work on six-laning of highway stretches. In its bid to ensure that developers don’t delay construction, it also allowed tolling to be suspended for failure to meet the deadline.
A senior government official said this provision will put pressure on both private road developers and government agencies such as National Highways Authority of India ( NHAI) and state PWDs to provide encumbrance free land and get statutory clearances for project development. “The party responsible for default will have to pay/bear the damage. Why should we allow people to suffer traffic jams and also pay toll charges,” the official said.
This rule will bring relief to lakhs of commuters on over 2,000 km of national highways which are scheduled to be taken up for widening from four-lane to six-lane in the near future.
In another decision, the Cabinet decided to bring more highways under the toll network. Tolling will be allowed on all future two-and-a-half lane roads (10 metres wide). Officials said the proposal is aimed to generate funds to keep roads in good condition.
However, the decision on fixing toll charges for expressways could not be taken due to difference of opinion. Sources said while Planning Commission favoured toll of 1.5 times than normal highways, road ministry wanted it to be capped at 1.25 times. A committee of three ministers has been set up to address the issue. The committee will submit its report in a week.
October 9, 2013
The union cabinet Tuesday approved the development of a national highway between between Gadu and Dwarka in Gujarat at an estimated cost of Rs.1,756.36 crore.
The cabinet committee on economic affairs, at a meeting chaired by Prime Minister Manmohan Singh, gave green signal for the development of the road project on National Highway-8E.
Out of the proposed 209.89 km of the highway, 119.7 km will be four-laned and 90.19 km will be two-laned with paved shoulders.
“The project will expedite improvement of infrastructure in Gujarat and also reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Gadu and Dwarka,” it said.
This road stretch links a number of sea ports on the western coast of India apart from coastal places like Dwarka, Porbandar and Somnath.
October 8, 2013
Dipak K Dash, TNN |
Out of these total projects work has started in the case of 17 stretches. Though all these months the road transport and highways ministry had been taking up the issue of only 23 projects where work is yet to start, the Cabinet Secretariat has received a supplementary note from the ministry. IRB had been raising the demand of extending the rescheduling scheme to all premium projects awarded post April 2010.
Premium is annual upfront payment that developers give to NHAI during the entire contract period in the case of lucrative projects.
Sources said the ministry has sought Cabinet’s approval for providing relief to road developers who have either started or are yet to undertake expansion work on project which are under “stress”. They added the stressed projects would be decided by the NHAI Board, which has representatives from highways and finance ministries besides the Planning Commission.
The ministry has proposed three options for Cabinet’s consideration. Sources said that the first proposal is to scrap all the 23 yet to start projects. Second option is to allow rescheduling of premium so that developers can take up work. The third option is to extend the relief to all premium projects.
The logic behind the third option is that those who have taken up work should not be penalized for going ahead while in many such cases the toll revenue have fallen due to bad economic condition.
Economic growth has direct relation to the toll revenue on roads.
September 27, 2013
(The government today approved two highways projects in Maharashtra, including JNPT Port road )
The projects for widening of four laning of Solapur- Yedeshi section of NH 211 and 6/8 laning of JNPT Port road project of Mumbai JNPT Port Road Company were approved by the Cabinet Committee on Economic Affairs (CCEA).
“The CCEA has given its approval for four laning of the Solapur-Yedeshi section of National Highway-211 under the National Highways Development Project (NHDP) Phase IV on Build, Operate and Transfer (BOT-Annuity) in Design, Build, Finance, Operate and Transfer (DBFOT) pattern,” an official statement said.
The cost of the 99 km project is estimated to be Rs 1,057.82 crore including the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities.
The project will expedite improvement of infrastructure in the state and also reduce the time and cost of travel for traffic, particularly heavy traffic, plying between Solapur and Yedeshi.
Development of this stretch will also help in uplifting the socio-economic condition of this region and increase employment potential for local labourers for project activities, it said.
About the Jawahar Lal Nehru Port Trust (JNPT) Port Road Project of the Mumbai JNPT Port Road Company (MJPRCL), the statement said it will be build on BOT-Annuity mode in Design, Build, Finance, Operate and Transfer (DBFOT) pattern.
“The cost is estimated to be Rs 1943.37 crore including the cost of land acquisition, resettlement and rehabilitation and other pre-construction activities,” it said.
The total length of the road will be approximately 43.912 kms of which 20.95 km will be of 6-laning and 22.962 kms will be of 8-laning, it added.
The project will expedite improvement of infrastructure in the state and also reduce the time and cost of travel for traffic, particularly heavy traffic, going towards JNPT.
The project corridor highway consists of NH-4B and NH-348. This network connects the JNPT, including its proposed Navi Mumbai International Airport in Maharashtra.
Development of this stretch will also help in uplifting the socio-economic condition of this region of Maharashtra, the statement said, adding, it will also increase employment potential for local labourers for project activities.
September 19, 2013
By PTI |
(Road Ministry’s proposal, to be taken up by the CCEA, suggests that companies can pay less premium in initial 2-3 years and the remaining amount in subsequent years.)
NEW DELHI: The government is likely to consider a proposal on Friday for restructuring of premium payment for companies building highway projects.At present, companies pay some amount of premium to the government in the first year of the project which keeps on increasing in the subsequent years.
According to sources, the Road Ministry’s proposal, which would be taken up by the Cabinet Committee on Economic Affairs, suggests that companies can pay less premium in initial 2-3 years and the remaining amount in subsequent years.
There will be no change in the value of the premium but companies can pay lesser amount initially, which is like a breather for the firms, sources said.
The Cabinet note for the proposal was circulated by the Ministry of Road Transport and Highways last month.
The move was proposed against the backdrop of some private infratstructure firms pulling out of road projects due to delays in regulatory clearances like land acquisition and environment clearances.
These problems had delayed the projects and affected the companies’ financials.
Earlier this year some private companies even terminated their contracts with the National Highways Authority of India ( NHAI) citing these reasons.
Therefore, in order to relieve the companies facing financial stress the Road Ministry proposed the idea of recasting the premium payment of the projects.
The ministry is also believed to have suggested that the restructured premium for any year should not be lower than the toll collected by the developer for that year and the developer cannot pull out from the project till all dues to the government are paid.