Highways ministry: EPC mode best for road projects

November 5, 2012

The highways ministry has said that the government must execute its ambitious project of constructing 9,500 kilometres of roads beginning this fiscal, through the public-private partnership route in the engineering, procurement and construction (EPC) mode as all other mechanisms of constructions have turned out to be costlier and time consuming exercises.

In a note to the Cabinet Committee on Economic Affairs (CCEA), the ministry has suggested that in view of the government’s objective of constructing 20 kilometres of roads per day as per the National Highways Development Programme, the Union Budget 2012-13 has had set a target of constructing 8,800 kilometres of roads this year, which was subsequently revised to 9,500 kilometres for the national highways.

It has sought the CCEA’s approval for constructing 4,000 kilometres this fiscal followed by 3,000 kilometres next fiscal and another 1,500 kilometres in 2014-15 through the EPC mode.

The ministry has justified this move by saying that the annuity mode in build, operate and transfer (BOT) projects is a high cost proposition in a high interest rate regime.

Under the “Waterfall Mechanism” recommended by the BK Chaturvedi Committee, highways with traffic density of 5,000 passenger car unit (PCU) can be taken up under the EPC mechanism.

But for roads with a higher PCU density it has said that BOT (Annuity) will have to be tested before executing them through EPC, which leads to unnecessary delays in the award of projects.

Since the majority of road stretches that were attractive to bidders are already under implementation, the remaining ones would necessarily be less attractive for bidders for taking them under the BOT (Toll) mode. The ministry cited the Planning Commission for having opposed the BOT-Annuity mode.

The ministry has asked the CCEA to empower it for awarding projects in the EPC route without having to go for implementation under the annuity mode.

It has also asked for the present ceiling of 4,000 kilometres of four-laning under National Highways Development Programme-Phase IV to be raised to 8,000 kilometres.

source: http://www.indianexpress.com