December 3, 2013
Road ministry wants to include the economic affairs secretary in the board of NHAI to help fast-track decision making on road projects
New Delhi: The road ministry wants to include the economic affairs secretary in the board of the National Highways Authority of India (NHAI) to help fast-track decision making on road projects by removing a layer of approvals required from other ministries, two officials familiar with the matter said, requesting anonymity.
The road ministry has floated a cabinet note with a proposal to enlarge the NHAI board and empower it to decide on issues such as conversion of project models when bids fail. Currently, the board includes secretary, Planning Commission; secretary, expenditure (ministry of finance); and secretary, road transport and highways; as part-time members, in addition to the chairman and five members of NHAI who are full-time members.
“Since a lot of the PPP (public-private-partnership) projects have failed to get bids between last year and this year and now we have the Prime Minister’s approval to bid those projects as EPC (engineering-procurement-construction), to fast-track the approvals to change the mode of bid, we have proposed in a cabinet note that the NHAI board be enlarged and be given the power to make this decision,” said one the officials mentioned above.
“The note has been sent to various ministries for comments and is likely to be sent for cabinet’s nod soon,” said the other official cited above.
In a 11 November review of the infrastructure sector, Prime MinisterManmohan Singh allowed the road ministry to pursue the EPC model after private firms shunned PPP projects.
“The NHAI board is already a high-powered board. In-principle steps to strengthen the board to take project-specific decisions are welcome,” said Pranavant, director at consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd. He uses a single name. “The board should be given the mandate to accord project-specific approvals like mode of implementation.”
November 25, 2013
OUR BUREAU| NEW DELHI
IIFCL opposed to the NHAI and Road Ministry stance that the exit norms for highway developers should be relaxed.
Highway developers should not be allowed to exit from projects till the highway stretches are constructed, a senior India Infrastructure Finance Corporation Ltd (IIFCL) official said.
This stance of IIFCL’s, which has disbursed around Rs 9,300 crore for road projects, is important in the backdrop of the Highway Ministry taking a re-look at the exit clause for highway projects.
IIFCL has sanctioned (net) about Rs 18,000 crore for road projects. It is the largest loan segment for the infrastructure financier. “Do not allow a developer to exit till construction has been done,” Sanjeev Ghai, Chief General Manager, IIFCL said, speaking at a traffic technology conference.
PROPOSAL ON TABLE
The Highway Ministry is reviewing a proposal to allow developers to sell their stake and exit from projects before they are permitted to underthe terms of the contract with the National Highways Authority of India.
At present, there are different rules regarding exit of road developers from their projects, depending on the year in which they had bagged the project. If the project was bagged after 2009, the exit norms are easier. But, for projects awarded before 2009, the norms are tighter and do not allow developers to sell stake before some years of operation.
The NHAI and Road Ministry had earlier taken a stance that the exit norms for highway developers should be relaxed. But, the Cabinet approved a proposal which allowed for lender substitution, something that has not taken off.
This is because highway developers raised concerns, saying, among others, that with the forming of a new special purpose vehicle, the income tax benefits of a 10-year infrastructure project are not transferred to the new developer who acquires the project.
“Senior lenders are unwilling to substitute during construction,” said Anand Kumar Singh, CGM, NHAI.
Mukesh Kumar, Vice-President, Infra Group, SBI Capital Markets, said that stake sale should be allowed between highway developers.
November 19, 2013
Mihir Mishra : New Delhi,
The finance ministry has approved plans by the road transport and home ministries and the department of information technology to implement safety improvement measures for women under the Nirbhaya Fund.
“The plans by ministry of road transport and highways and home affairs and department of information technology have been selected by the finance ministry,” said a senior road transport ministry official. The approvals came in a meeting chaired by the finance minister this month.
This fund, to be spent on providing security to the women across the country, was announced by finance minister P Chidambaram in Budget 2013-14.
The official further said that the road transport ministry’s approved plan, includes installing cameras and global positioning system (GPS) in buses and other modes of public transport.
“The recordings by cameras and GPS will be monitored real time. We also plan to closely work with the police to ensure their intervention in case of detection of any untoward incident. The plan is to implement these in cities with population over 1 million,” he added.
The intercity buses plying in Delhi have GPS system installed and any change in route is detected by the control centre, where it is monitored.
“We also have to decide on the number of control centres that is going to be opened. Whether we open it in all cities or key cities is a decision that needs to be taken,” he added.
The plan by the department of information technology is to come up with a watch, pen or mobile with a panic button to send out distress signals. The home ministry’s plan is to develop a system to ensure tracking accidents as early as possible.
The Nirbhaya Fund was name after Nirbhaya, a pseudonym given to the victim of the gang rape that took place in Delhi on December 16, 2012.
November 14, 2013
The recent restructuring exercise of road contracts demonstrates India’s adaptability but a road regulator – not a committee – is needed
On October 8, 2013, the Union Cabinet gave an “in-principle” approval to a one-time premium restructuring package for a slew of premium-based road contracts that had become “stressed” on various counts. The government subsequently constituted a committee under C Rangarajan, chairman of Prime Minister’s Economic Advisory Council (PMEAC), to detail out the eligibility conditions and terms of the scheme. The committee empanelled five members, and is expected to come up with its recommendation in December. The five members of the committee are ministry of road transport & highways (MoRTH) Secretary Vijay Chibber, Planning Commission Secretary Sindhushree Khullar, PMEAC Secretary Alok Sheel,
National Highway Authority of India (NHAI) Chairman R P Singh and Expenditure Secretary R S Gujral. A representative from the private sector, an independent business leader, would have been a useful addition considering it is a public-private partnership (PPP) matter.
The “in-principle” Cabinet approval was welcomed by all the concerned developer groups, many of whom are currently incapable of supporting their projects in their existing form. This is because of their own financially stressed positions, unexpectedly low traffic, delays in sovereign deliverables, and in some cases – aggressive and irrational bidding. The relief package involves back-ending the scheduled premium payments in the initial years when traffic is lower, growth drivers indeterminate, and capital requirements and debt servicing at their peak. This relief in the initial years is to be compensated by higher premia in subsequent years, so that the net present value (NPV) of the promised cash flows to NHAI remain protected.
The opposition to the scheme is primarily on the issue of moral hazard and the adverse impact that any such ex-post accommodation mechanism has on the sanctity of bidding processes.
Although one cannot obviously question the imperative to avoid such events in the future, for now at least, practical considerations point towards going ahead with the reset for the following seven reasons:
(1) Renegotiations need to be understood, accepted and imbibed as an integral part of PPP processes, especially at the early stage of their evolution. An overview of more than 1,000 PPP concessions studied by the World Bank Institute in Latin America and Caribbean from 1985-2000 throw up these characteristics of PPP renegotiations:
- 41.5 per cent have undergone renegotiations.
- Out of the total concessions in transport infrastructure sector, 55 per cent of the concessions underwent renegotiations.
- 85 per cent of renegotiations occurred within four years of concession awards and 60 per cent occurred within three years.
- Renegotiations occurred mostly in concessions awarded through competitive bidding.
So, renegotiating a PPP project is by itself not taboo.
(2) It is clear in hindsight that the magnitude of risks and the ability of different stakeholders to manage them had not been adequately assessed. The private sector has shown through its overaggressive traffic estimation, high-debt leveraging and exuberant bidding that it often lacks management maturity, as well as risk assessment and forecasting skills. NHAI has also conclusively demonstrated its inability to eliminate outlying bids, procure sovereign clearances, perform timely land acquisition and clear due processes in clearly defined and accountable time frames. The need for contract renegotiations becomes inevitable till such shortcomings are addressed.
(3) From NHAI’s point of view, the high premiums accruing to it, even after the reset, would no way compare to the expected low or vanishing premia if the projects were to be put up for rebidding in the current adverse investment mood and environment. NHAI is estimated to receive more than Rs 1.51 lakh crore over the next 20 years from developers in return for awarding projects. If the projects were to be rebid, it is not unlikely that over-cautious developers could consider a 30 to 40 per cent decline in traffic projections that could effectively wipe out any premium, or even bring the bidding to a request for viability grant.
(4) Rebidding will inevitably lead to huge delays in getting these projects off the ground, and would mean further increases in project costs. It would adversely affect all downstream benefits of gross domestic product growth, job creation, spur to the construction sector, capital-goods sector order-book accretion and a required resurgence of the investment sentiment, particularly PPP sentiment.
(5) The NPV-neutrality, as a public-policy paradigm, passes the test of transparency and fairness. It legitimises the eligibility of the highest bidder to continue. GMR, for example, under the back-ended schedule, is believed to have to pay up in Rs 59,000 to 65,000 crore over its 26-year period as against Rs 32,000 crore originally.
(6) Annulling of the previous bids will send serious negative signals to domestic and global investors.
(7) Unlike the recently allowed compensatory tariff dispensation by the Central Electricity Regulatory Commission (CERC) for imported coal-based ultra mega power projects, there is no alteration in user charges (toll) as part of the restructuring.
At an office discussion led by Rajeev Bhatnagar and Debal Mitra of the Highways Division, the following views were offered on some contentious points:
(i) Coverage and eligibility: The road ministry is considering the bailout of only 23 projects but the developer community has opined that the package should be made available to all affected premium-based projects (estimated at 40 plus in number) as similar financial impediments would be faced by most, if not all. A parameter-based “stress” ranking should determine nature and grades of relief to be considered.
(ii) Discounting rate: The 12 per cent discounting rate proposed by the Cabinet seems harsh, to the point of being unacceptable, considering it had approved a rate of 9.75 per cent for the spectrum fee deferrals by telecom operators last year. Besides, the rate is based on existing interest rate levels as benchmarks that are at the high end, whereas for a typical concession period of two decades or more, one should consider mirroring through-the-cycle interest rates. Burdening the already leveraged projects with higher discounting rates would defeat the purpose of the bailout. A 10 per cent discounting rate appears fair.
(iii) Penalty: The Cabinet has also proposed levying an exemplary penalty of up to 0.5 per cent of project cost, if the default is attributed to the developer. This is conceptually acceptable both as a penalty and as a deterrent.
(iv) Bank guarantee: There is a view that developers furnish a bank guarantee to the extent of the maximum difference between the earlier and current premium. Since the original concession agreement did not impose the submission of any bank guarantee for the premium, bank guarantees for the incremental amount seem illogical.
(v) Premium re-scheduling: Developers have demanded a moratorium of 6 to 8 years, while the Planning Commission has proposed a set percentage of premium gaps being backloaded every year. Given that the specifics of each project are different, the most appropriate stance will be to leave it to NHAI to decide the optimal schedule bilaterally with the developer.
(vi) Empower NHAI after committee decision: Once the Rangarajan Committee has conveyed the format, NHAI should be fully empowered to settle with concessionaires. Kicking the settlement can once again between the PMO, law, finance, Planning Commission, MoRTH et al should be clearly avoided.
(vii) Road regulator: As I have stridently argued in an earlier Infratalk (Road regulator needed by yesterday, July 3) having an empowered and credible road regulator would have allowed the system to effect a solution much earlier rather than this practice of creating ad-hoc committees for every problem that surfaces.
In conclusion, this highway premium restructuring exercise, along with the recent imported-coal price pass-through decision by CERC, is demonstrating India’s ability to gradually come to grips with PPP renegotiations as an inevitable process issue.
November 12, 2013
Ministry is disappointed by dismal response of domestic companies to road projects opened up for bids this year
New Delhi: Disappointed by the dismal response of domestic companies to road projects opened up for bids this year, the road ministry is considering taking its big-ticket projects to international markets.
November 12, 2013
Dipak Kumar Dash, TNN |
The ministry has reduced its award targets drastically on both PPP and EPC modes. Against the original target of awarding about 3,200 km on PPP model, NHAI and the ministry have awarded only 700 km. Similarly, while the target to award on EPC was kept at 6,950 km, it has been whittled down to around 5,000 km.
“We are hopeful of awarding about another 1,000 km on EPC of the 2,000 km that NHAI had planned to bid out on PPP mode after the PM and finance minister has favoured our stand. We submitted how there is a need to go slow and to shift to EPC mode since private players are not putting bids for quite some time,” said a senior ministry official.
Though officials also submitted that the ministry and NHAI are in a position to invite tenders for three expressway projects – Eastern Peripheral Expressway, Delhi-Meerut and Mumbai-Vadodara – they are unsure whether there will be bids on PPP mode.
Meanwhile, department of economic affairs secretary Arvind Mayaram said that the bad patch for private investment in infrastructure will pass. Speaking on sidelines of Indian Roads Congress (IRC) convention, he said private investment will resume in the next six-eight months as economic condition has started improving.
Planning Commission member B K Chaturvedi also admitted that private investment has fallen significantly due to global financial situation. “During our mid-term review we will consider whether there is a need to rework the financing model to increase government funding. Obviously, we now want more projects to be on EPC mode,” he added.
November 8, 2013
New Delhi: The Ministry of Road Transport and Highways (MRTH) is to conduct road shows in foreign lands to entice companies abroad to take up road projects in India. The ‘road shows’ are to be conducted primarily in Australia and China over next few months, according to media reports.
October 10, 2013
By PTI |
NEW DELHI: The Road Transport and Highways Ministry has asked the state governments to form high-level committees to take steps for reducing road accident fatalities that have increased consistently in recent years.”All the state governments are requested to constitute High Level Committees headed by the Chief Secretary to take stock of the road safety scenario in their States and the measures required to be instituted at the State level to reduce road accident fatalities,” the Ministry said in a missive to states.
A total of 4,90,383 road accidents were reported by all states/Union Territories (UTs) in 2012, of which 1,23,093 were fatal accidents.
“The number of persons killed in road accidents were 1,38,258 i.e. an average of one fatality per 3.5 accidents. The proportion of fatal accidents in total road accidents has consistently increased … we have to go a long way before we can rest,” the Centre has said.
Citing China’s example for curbing accidents, it has asked states to ensure that its various wings, including Transport, Health, PWD, Police, Justice, Education and Finance worked in close coordination in view of “strategy for ensuring road safety being multi-pronged.”
Unless special arrangements are put in place to ensure close coordination and accountability, realising the full potential of individual sectoral responsibilities and the goal of road safety is not possible, it said.
It also asked the states to tighten noose round the necks of liquor shops violating norms.
The states have also been requested to ensure that licences for liquor shops are not given along National Highways and in case of drunken driving to strictly enforce Section 185 of Motor Vehicles Act, 1988 which provides for punishment of imprisonment or fine or both for the offence of drunken driving.
It also asked states to set up highways patrol on the pattern of Maharashtra stressing such dedicated police force can bring down accidents and ensure safety.
Maharashtra has a designated police force for highways. A Traffic Engineering Unit under it analyses the causes of accidents and suggests preventive measures, it said while asking states to emulate this model.
Although National Highways constitute only about two per cent of the total road length they account for 29.1 per cent in total road accidents and 35.3 per cent in total number of persons killed in road accidents.
The Ministry said in view of manifold increase in road traffic during last few years “It is very much necessary to regulate the traffic movement.”
India has 33 lakh km of road network, of which about 79,000 km is the National Highways.
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.
September 18, 2013
In a bid to ensure that the tendering process of projects sanctioned for implementation in the Engineering, Procurement and Construction mode does not encounter delays, the Ministry of Road Transport and Highways has taken a decision allowing state governments to issue Request for Proposal in case of works costing less than Rs. 100 crore under the single stage two cover system, as was followed for item rate contracts based on the Standard Bidding Document.
An office memorandum issued by the MoRTH on September 6th, 2013, said that the eligibility (qualifying) criteria prescribed would have to adhere to the Request for Qualification for EPC projects.
In the single stage two cover system, bids are invited under two covers. The eligibility of the bidders is first examined on the basis of details submitted under the first cover (technical bid). The financial bid under the second cover is opened only for those bidders who qualify based on evaluation after opening of the first cover.
The MoRTH has already declared the eligibility limit of 34 conditionally qualified applicants who had sought annual pre-qualification under RFAQ 2013 (umbrella RfQ) for national highway projects to be implemented in the EPC mode. A total of 17 applicants were considered non-responsive in the process. In case of 144 applicants, certain clarifications had been sought by September 10th, 2013. The results of these applicants are expected to be declared after the clarifications have been furnished.
Applications for annual pre-qualification under RFAQ 2013 were invited in May this year. The eligibility limit (as on July 5th, 2013) declared by the MoRTH would be valid till June 30th, 2014. Those found qualified/eligible can bid for projects having estimated project cost within their pre-qualified eligibility limit. Pre-qualified applicants are entitled to make simplified applications at the RFP stage of each project.