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GMR consortium wins Hungund-Hospet highway project

The consortium of GMR Infrastructure (Q,N,C,F) and Oriental Structural Engineers (OSE) has won the prestigious Hungund-Hospet highway project on a build, operate and transfer (BoT) basis through the international competitive bidding route.

GMR Group will hold 51% equity in the consortium and 49% will be held by OSE. The consortium received the Letter of Award from National Highways Authority of India (NHAI) on Feb. 08, 2010. This is ninth highway project of GMR Group after successfully completing six projects as per schedule. Two projects measuring 211 kms are currently under development.

The project measuring 99 kms on NH-13 with an estimated project cost of Rs 17 billion entails designing, engineering, finance, procurement, construction, operation and maintenance of four laning of the Hungund Hospet section in the state of Karnataka. This will ease traffic congestion and provide a tremendous boost to trade and commerce in the state. Apart from reduction in travel time, this development is expected to improve safety levels for travelers since it will be built to world-class specifications.

Several national and international consortia participated in this bidding process in which GMR Group-OSE Consortium was adjudged as the preferred bidder. The project will be implemented through a special purpose vehicle (SPV) set up by the Group which will be signing the concession agreement with the NHAI for a period of 19 years. All activities leading to the concession agreement signing have been initiated.

Commenting on the significance of the project, Srinivas Bommidala-business chairman (Urban Infrastructure and Highways) of GMR Group said, “The project is of strategic importance to us since it provides vital link in the movement of major industrial and tourist traffic across Karnataka. We are delighted to be a part of this development and are keen on ensuring that the project caters to the needs of multiple stakeholders.“

GMR Group had entered the highways business in 2001 by winning two projects with benchmark annuity offer. It has even received an early completion bonus from the NHAI for completing the Tambaram-Tindivanam project in Tamilnadu ahead of schedule. Today, the group has a balanced portfolio of four annuity and four toll projects (toll operations for three projects have already commenced) totaling 630 kms across the length and breadth of the country. All six projects have been completed as per schedule and two are currently under developmental stage.

Shares of GMR Infrastructure declined Rs 0.5, or 0.89%, to trade at Rs 55.55. The total volume of shares traded was 845,260 at the BSE (1.29 p.m., Tuesday).

Source: myiris.com

Backward-bending policy to take toll

The B K Chaturvedi committee has suggested ways for expeditious financing and implementation of the National Highways Development Project (NHDP). It has rectified problematic rules concerning the exit policy, bid security, security to lenders, request for qualifications (RfQ) and request for proposal (RfP). These belated measures will surely make highway projects more attractive for investors.

However, some other recommendations bear unmistakable signs of fear psychosis, perhaps caused by the reduced private investment in highways during 2008-09. The decline was largely due to two reasons: the detrimental and mid-course changes made in RfQ and RfP rules, and the economic downturn. But in a typical panic-driven response, the committee has confused symptoms with the causes. Thus, it has introduced some questionable changes in the model concession agreement (MCA) for tolled projects. Conversely, several crucial issues have been ignored.

To put arguments in perspective, recall the pre-August 2008 scenario: 9%-plus growth rate, upbeat credit and financial markets, and bullish investors scrambling for projects to invest in. During 2006-07, more than 60 highway projects attracted private investment. In fact, there was a shortage of well-structured projects on offer.

The extant rules regarding the viability gap funding (VGF) and termination of contract posed no threat to the attractiveness of highway projects. Yet, the committee has targeted these rules to implement investors’ wishlist. Under a BOT-toll contract, an investor is granted the right to charge toll from users.

There are two main justifications for this concession: investors provide upfront funding for projects, alleviating the taxpayers’ burden, and bear the construction, maintenance and commercial risks. VGF grant is provided to make a socially-desirable but unprofitable project attractive for an investor. The underlying objective is not, and should not be, to add to the upfront financing — that is for the private sector to do. Limited funds are available for VGF. The MCA rules allow VGF up to 40% of the project cost; 20% during construction phase and the rest during maintenance phase.

In contrast, the committee has offered the entire grant during construction phase itself, and has reduced
it to a mere cost-sharing device. Further, compared to what would have been possible under the earlier rules, now the grant requirement of fewer projects will be met with. So, at least in the short run, fewer grant-dependent projects will take off.

Besides, an investor can borrow 20% of project cost at concessional rates from the IIFCL, a public sector company. Indeed, excluding the profit margins, an investor can meet up to 70% of cost just using grants and other funds raised by public sector entities. Simply put, what was to be the investor’s responsibility has been passed on to the taxpayer, undermining the rationale of VGF as well as toll contracts. Moreover, an investor is reimbursed 90% of due debt if the contract gets terminated. So, the new rules are likely to create moral hazards during construction phase and later.

Under MCA rules, if actual traffic turns out to be less (greater) than predictions, the concession period is increased (reduced) proportionately. If traffic increases beyond the designed capacity, to avoid congestion, the concessionaire is required to widen the road at his cost. These rules imply that road users get satisfactory service, and the investor and the taxpayer share the unanticipated losses (gains) arising from traffic-risk. In contrast, under the new rules, if the government asks for capacity expansion on account of high traffic, it will have to compensate the investor. Moreover, the contract period cannot be reduced. So, the event of traffic exceeding the designed capacity has become lucrative for the investor. It would ensure them unexpectedly high profit.

Source: economictimes

By 2022, govt to lay 18,637km of expressways

NEW DELHI: The government has drawn up an ambitious target to lay 18,637km network of brand new expressways by 2022. These high-speed, access-controlled roads will be of the four-lane and six-lane variety with 3,530 km to come up in the next three years.

The highways ministry is ready with a Master Plan for the National Expressway Network. The new target of expressway length was projected after receiving observations from 11 states including Madhya Pradesh, Bihar, Gujarat, Karnataka and Uttar Pradesh. Earlier, the final draft report prepared by the highways ministry had proposed to develop 17,661 km of expressway network.

The expressways network will not be an upgraded national highway network but will be developed entirely as greenfield projects. These will preferably be built with three-metre high embankments and will have service roads along the stretches where there is a need. Officials said there was an urgent need to develop expressways network as road transport would remain the mainstay for sustaining the economic momentum of the country.

“The existing arterial network cannot meet the latent and the emerging demands for connectivity and accessibility while ensuring the desired level of safety,” said a senior ministry official.

As per estimates, the construction cost per km would be Rs 14 crore in case of 4-lane and Rs 20 crore in case of 6-lane expressways excluding land acquisition and other expenses. A recent presentation made before the top brass of National Highways Authority of India (NHAI) and the ministry also mentioned that while majority of identified stretches would be built on build-operate-transfer (BOT) mode, stretches which were unviable could be developed on annuity basis.

The Master Plan document has also phased the expressway development programme for 2012, 2017 and 2022 and this has been done on the basis of financial viability, relative traffic intensity along various corridor segments, network comprehensiveness, connectivity warrants and relative economic potential of each proposed project.

The ministry is already in the process of preparing a draft for creation of a National Expressways Authority of India (NEAI) on the lines of NHAI and the highway regulator has also got an exclusive wing for the expressway as a stop-gap arrangement.

Source: timesofindia.indiatimes.com

Bumps in road funding to be eased

NEW DELHI: The government is exploring ways to improve flow of funds to developers executing road projects by making funding of such projects
attractive for financial institutions, including insurance companies.

The panel on highway development, headed by the Planning Commission member BK Chaturvedi, is now working on the second part of its report on expediting work on the ambitious National Highways Development Project (NHDP).

“We have sorted out funding issues of the NHAI through cess and government guarantees, at least for one year. Now we have to look at the issue of financing of people who are building the roads,” Mr Chaturvedi said in an exclusive chat with ET.

The government has already accepted Chaturvedi panel’s recommendations on relaxing the norms for public-private projects (PPPs) in the road sector, continued funding of National Highways Authority of India through road cess collection and government guarantee for its borrowings.

The government has set a target of constructing 7,000 km of road annually, which translates into building 20 km of roads a day. It is planning to hand out contracts for nearly 12,000 km of highways to private developers in the next one year.

“We are examining what kind of safeguards are required to make insurance companies lend to road projects,” he said, adding that they would want the government to share risk and also give guarantees that the debts would be repaid.
The panel is still in the process of collecting information from the industry and other parties concerned and hopes to finish its report by January-end.

The government has decided to guarantee NHAI’s borrowing for the current year. The financing of NHAI in the years to come is yet to be decided. “ The empowered group of ministers set up on road financing will look at how the funding requirements of NHAI will be handled in the following years,” Mr Chaturvedi said.

Although NHAI does involve the private sector to fund projects through the build operate and transfer (BOT) mode of finance, it has its own financing needs as well.

NHAI has to invest in all projects carried on EPC or cash contract basis, which is the standard financing format in the North East and J&K where private players are not too keen to take risks because they are commercial unviable in these areas.

NHAI has to make some investments even in projects that are handed out to private road developers through the build operate transfer (BOT) basis to the extent of making them commercially viable, through what is called viability gap funding.

It has to pay an annual annuity to developers under the BOT annuity option and provide capital grant to increase viability of projects under the BOT toll option where private developers are allowed to collect toll for recovering costs and earning profits.
Source: economictimes.indiatimes.com

NH-6 extention plan till Hazira port to be put on fast track

With the Congress-led UPA government taking over at the Centre, widening and extending of the 132-km stretch of road project between

Gujarat-Maharashtra border and Hazira port on 2,000-km long National Highway-6 (NH-6) is likely to be put on the fast track by National Highways Authority of India (NHAI).

The project was caught in a logjam for quite some time as a few industries were unwilling to part with the required tract of land.

The Cabinet Committee on Economic Affairs (CCEA) of UPA government had approved the project costing Rs 1,661 crore on February 5 this year. With the bidding process for the project already underway, the new government is likely to clear roadblocks soon, said sources in NHAI.

The process began in May 2008 with NHAI inviting tenders for short listing suitable agencies to implement the project. But, nothing concrete could be achieved, largely due to some public sector undertakings (PSUs) lobbying hard for an alternative route, as widening of existing road requires strip of land under their jurisdiction.

The plan to extend NH-6 was stuck after National Thermal Power Corporation (NTPC) and Krishak Bharati Co-operative Ltd (KRIBHCO) made several representations to NHAI in May last year stating that they were not in a position to spare additional strips of land near their facilities.

According to a letter in April last year by NHAI to all industries in Hazira, an additional land strip of 36 m to 42 m along the existing road was required on the stretch of 8.7 km from KRIBHCO to NTPC and on 5.7 km near Essar Group in Hazira area.

An alternative suggestion was made by KRIBHCO to avoid widening the existing road in Hazira and NHAI. “But a truncated stretch was not possible and hence not a substitute to the proposed highway up to Hazira port,” a senior official in NHAI told TOI.

NHAI, a central government agency, is keen on executing this project.
Source: timesofindia.indiatimes.com

LANCO bags two toll road projects in Karnataka

LANCO Kondapalli Power Pvt Ltd, a subsidiary of LANCO Infratech Ltd, has bagged the contract for construction and operation of two road projects in Karnataka on Build, Operate and Transfer (BOT) basis under the National Highways Development Project (NHDP) Phase III.

The company has formed two Special Purpose Vehicles (SPVs) – LANCO Hoskote Highways Pvt Ltd and LANCO Devihalli Highways Pvt Ltd for undertaking the projects. The concession agreements for the projects have been signed with the National Highways Authority Ltd. The two road projects are the 81 km Bangalore-Hoskote-Mudbagal stretch on National Highway 4 and 82 km Neelamangla – Devihalli stretch on National Highway 48. The project involves six laning of 16 km stretch and four laning of the remaining stretches. The total project cost is estimated at Rs 1,006 crore. The concession periods are 20 and 25 years for the two projects respectively, including 30 months of construction period. The contracts have been awarded through a competitive bidding process.

LANCO Group is one of the fastest growing corporate entities in India. LANCO has more than two decades of experience operating in the core sectors of Power Generation, Power Trading, Realty, Engineering and Construction, Information Technology and Manufacturing. At present, the power portfolio includes an operating capacity of 518 MW and additional capacities under construction aggregating to more than 3,200 MW.  The Construction and EPC division of the company is executing various orders worth more than Rs 7,500 crore.  LANCO is also developing LANCO Hills, one of the largest integrated township properties in Hyderabad, which will have a developed area of more than 30 million square feet and one of the tallest residential towers in the world.  The development of the property is estimated to cost Rs 5,500 crore.

Source: moneycontrol.com

STATUS OF WORK ON SELECTED HIGHWAY STRETCHES IN PUNJAB

The status of Chandigarh-Kiratpur, Amritsar-Pathankot and Jalandhar –Amritsar stretches are as under:

(i) Chandigarh-Kiratpur stretch: The Chandigarh-Kurali section is of 28.6 km length. Out of this, the stretch from km 0.0 to km 11.4 is four/six laned. Four laning from km 11.4 to 15.4 has been sanctioned for Rs.13.51 crore on 31.03.2008 by Ministry. Four laning of the remaining section from km 15.4 to 28.6 is to be taken up under National Highways Development Project (NHDP) Phase – III. The 4 – laning of Kurali-Kiratpur section has been awarded in June 2007 on BOT basis and the work is likely to be completed by June 2010.

(ii) Jalandhar-Amritsar stretch : The Detailed Project Report (DPR) to take up the work of four- laning on Build, Operate and Transfer (BOT) toll basis for Jalandhar-Dhilwan section has been updated by the consultant. The bidding process shall be started after Public Private Partnership Appraisal Committee (PPPAC) clearance. The four – laning of Dhilwan to Verka Chowk, Amritsar section has been started in May 2006 and the work is targeted to be completed by November 2008.

(iii) Amritsar-Pathankot Stretch : The Detailed Project Report (DPR) preparation for four laning of this stretch is in advance stage of completion. The bidding process shall be started after Public Private Partnership Appraisal Committee (PPPAC) clearance.

This information was given by the Minister of State for Shipping, Road Transport and Highways, Shri K.H. Muniyappa in a written reply in the Lok Sabha today.

Source: pib.nic.in

DEVELOPMENT OF EXPRESSWAYS UNDER NHDP-VI

The following stretches under National Highways Development Project (NHDP) Phase-VI have been identified for implementation.  

S. No.	Name of Expressway	Length (Km)	Status of work
1.	Vadodara-Mumbai	400	The consultant for fixing of alignment has been appointed.
2.	Delhi-Meerut	66	The proposal from the consultants for fixing of alignment has been invited.
3.	Kolkata-Dhanbad	277
4.	Bangalore-Chennai	334

            The Delhi-Jaipur stretch was one of the stretches announced by the Finance Minister in his budget speech for the FY 2008-09 for construction of Expressway.  The project was to be finally selected for implementation on the basis of traffic volume.       However, in view of the upgradation of existing alignment to six lane under NHDP Phase-V, which will be sufficient to cater to the traffic volume for another 10-12 years, the new Expressway is not envisaged, at present.

      NHDP Phase VI is targeted for completion by December 2015. 

This information was given  by the Minister of  State for  Shipping, Road Transport and Highways, Shri K.H. Muniyappa in a written reply in the Lok  Sabha today.

Source: pib.nic.in

NHAI terminates road contract awarded to MP-owned company

Parliament member Samba Siva Rao’s Progressive Constructions was unable to build 55km road

New Delhi: Under pressure for poor results and with the government seeking an overhaul of its management team, the National Highways Authority of India, or NHAI, the country’s road regulator, has begun axing contracts for non-performance, including those awarded to companies with powerful political connections.

These troubled contracts are partially to blame for holding up completion of the so-called Golden Quadrilateral that would connect four regions of India through 5,846km of four-laned highways. Within the last month, NHAI has cancelled two contracts and encashed their bank guarantees.

The more high profile of the two was the termination of a contract awarded to a company run by the family of a Congress party member of Parliament, Kavuru Samba Siva Rao.

“These contracts had to be terminated because they had defaulted,” said NHAI chairman N. Gokulram, refusing to discuss the matter further.

As many as eight contracts under the Golden Quadrilateral have already been terminated between 2006 and 2007. Of the 5,846km of highways that were to be four-laned under the project, NHAI is yet to complete 206km.

Hyderabad-based Progressive Constructions Ltd, which was set up by Rao, a four-term MP, and is managed by his son Bhaskar Rao, was not able to complete the 55km stretch even four years after the initial deadline expired. Consequently, NHAI terminated the contract and encashed a bank guarantee of around Rs50 crore submitted by the company when it was awarded the Sunakhala–Ganjam highway project.

NHAI officials, who did not wish to be identified, insist that this is just the beginning and it “would spare no one regardless of their political connections”.

A dozen contracts, whose performance is holding up completion of the Golden Quadrilateral project which was started by the National Democratic Alliance government in 1998, but is yet to be completed, are being scrutinized by NHAI.

According to officials in the ministry, Progressive was awarded the contract in 2001. The highway work was to be completed by 2004. When the contract was terminated last month, the company was only half-way done, with the project valued at Rs163 crore.

“I am not looking after these things (management). My son Bhaskar Rao runs the company,” said Rao, adding that there was also a feeling among contractors that “all was not well with NHAI.”

While the MP declined to elaborate the reasons for not being able to proceed with the project, he maintained that problems faced by the contractors, such as land acquisition, threat from Naxalites and law and order issues, have not been addressed.

“NHAI could not hand over the land within the time frame and in the sequence as was stipulated in the contract. This has affected the project,” insisted a senior executive with Progressive.

NHAI has also terminated the contract of Prakash-Atlanta, a joint venture between Prakash Building Associates Ltd and Atlanta Infrastructure Ltd, for failing to complete the Lucknow bypass on time. An NHAI officer said the regulator had also encashed the bank guarantee of Rs28 crore from the company.

However, the company says that it was its contractor who had initiated the termination proceedings. In a 14 March letter addressed to the NHAI chairman and the consulting engineer for the project, a copy of which was viewed by Mint, the contractor requested that the contract be terminated and NHAI provide compensation.

The letter said the contract was supposed to be completed in 30 months by August 2004. The contractor, however, alleged that a number of problems, including land acquisition and variance in scope of work, dogged the project.

“Another problem is the quality of the detailed project reports,” said an official with the company, who did not wish to be quoted. The project went to an arbitration tribunal following disputes over variation in costs of the project.

“Now it has become crystal clear to us that the policy of NHAI is to use the contractor as a resource and exhaust him completely before termination of the contract wrongfully and illegally, and further crippling the contractor by making demands on securities and bank guarantees,” the letter stated.

The letter also said the contractor filed two separate termination notices to NHAI. Each time, the contractor was persuaded to continue work on the project.

“On the one side, the government is insisting on completion. On the other side, bankers and shareholders are asking for results. So, any delay in finalizing the bills or making payments from government side may have lot of impact on the promoters credibility with the bankers and also with the government and of course the investors,” said Murali M., director general of the National Highways Builders Federation.

Source: livemint.com

National highway projects underway in the north eastern region

The Border Roads Organisation, National Highways Authority of India and state public works departments (PWDs) will execute national highway (NH) project works in the north-eastern states as per the lump sum amount allocated by the ministry.

Responding to a query in the Lok Sabha, minister of  state for  shipping, road transport and highways  K H  Muniyappa said, the national highway (NH) project works are underway in the north eastern region (NER) of India against lump sum amount allocated by the ministry. The Border Roads Organisation, National Highways Authority of India and state public works departments (PWDs) will execute the special projects in Sikkim and Tripura fully and in other states partly as per government allocations

The annual plan for the special programmes has not been finalised.

The state public works departments of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram and Nagaland are also engaged to execute NH works in these states on the basis of sanctions accorded by the ministry in successive annual plans.

The plan for the  development of the national highways in the 11th Five-year Plan has yet to be finalised by the government. The amount of works for development of national highways approved by the ministry during 2007-08 (1st year of 11th plan) and the amount of works included in the list of works prepared by the ministry for sanctions during 2008-09 for the six states to be executed by the state PWDs is:

(Rs in crore)

State	Amount of sanctions accorded during 2007-08	Amount of works listed for sanctions during 2008-09
Arunachal Pradesh	0.00	30.00
Assam	112.12	292.00
Manipu	37.97	99.00
Meghalaya	43.87	264.00
Mizoram	21.95	119.50
Nagaland	47.08	50.50

The expenditure incurred on the development of national highways in north-east region during 10th Plan was  Rs2,383.93 crore. In addition, the expenditure on development of national highways has also been incurred on special accelerated road development programme in north east (SARDP-NE). The expenditure under SARDP-NE during 2006-07 is Rs91.65 crore. The budget of 2008-09 is yet to be passed by the Parliament.

Four-lane Guwahati bypass was completed during the10th Plan. Karimganj,  Nagaon, Daboka, Lanka, Lumding, Maibang, Udharband, Mahour, Baihata and Agartala  bypasses are under construction and bypasses of Dibrugarh, Tinsukhiya, Makum, Dum Duma, Rupai, Digboi, Margreita, Ledo and North-Lakhimpur in Assam and Shillong, Jowai and Tura bypasses in Meghalaya and Dimapur and Kohima bypasses in Nagaland and Gangtok bypass in Sikkim are in Planning and Survey & Investigation stage.

Time frame for works of double laning, 4-laning and construction of bypasses approved during 2007-08 is given below:

The list of  works for double laning, four laning and bypasses approved under Annual Plan 2007-08

Assam: Widening of 8 km of existing intermediate lane of NH-37 from 563/0 to 571/0 to double lane by March 2010

Manipur: Widening to 4-lane from km 323.330 to 326.660 of NH-39 by March 2010

Meghalaya: Widening of single lane to two lane from km 21/870 – 43/00 0f NH-51 by March 2010

Nagaland: Widening to 2-lane with geometric improvement from km 17.00 to 23.00 of NH-61 by March 2010 and widening to 2-lane with geometric improvement from km 33.00 to 40.00 of NH-61 also by March 2010.

Source: domain-b.com

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