NHAI, ministry agree on realistic highway award targets

November 12, 2013

Dipak Kumar Dash, TNN |

NEW DELHI: Government on Monday approved flexibility to award highway projects on public funding mode, or EPC, where private players are not bidding for works on public-private partnership (PPP) model. At a review meeting – chaired by Prime Minister Manmohan Singh – it was decided that the highways ministry and NHAI won’t rush to award more projects simply to achieve targets.

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.



Target for highway projects halved

November 11, 2013

Proposal to cut the target of contracting out 4,028km of highway projects to be placed at a review meeting today

Ragini Verma 
The roads ministry awarded just 1,322km of road projects in 2012-13 against a target of 9,500km. Photo: Mint<br /><br />

The roads ministry awarded just 1,322km of road projects in 2012-13 against a target of 9,500km. Photo: Mint


New Delhi: India’s roads ministry has nearly halved its target of awarding highway projects to 2,128km in the year to March because developers are not showing interest in bidding for many of these. “There is no interest from the private sector and the slowdown is severe on the PPP (public-private partnership) projects front,” a ministry official said.
The proposal to scale down the target of contracting out 4,028km of highways projects will be placed at a review meeting on Monday that Prime Minister Manmohan Singh is expected to attend. This is the second lowering of the target that was set at 7,500km at the beginning of this fiscal year.
Road projects worth Rs.27,000 crore totalling 2,900km did not receive any bids between March last year and October, the official said, requesting anonymity. The ministry has so far in the current fiscal awarded just 123km of highway projects to be implemented in partnership with private firms against the target of 2,023km. “We do not expect to be able to award any more highway projects under the PPP mode,” the official said. “We will focus on meeting our target for awarding projects under the EPC mode.”
EPC stands for engineering, procurement and construction, under which the government pays a contractor a sum to build a project awarded through competitive bidding.
At the meeting with Singh, the ministry will also bring up the issue of the mandatory requirement of 90% land acquisition at the bid stage as slowing down the award process.
The ministry awarded just 1,322km of road projects in 2012-13 against a target of 9,500km. The sector has seen a slowdown due to the overall economic downturn, lack of equity in the market, cautious lending by banks and the highly leveraged balance sheets of developers.
“Developers are shying away mostly because they do not have liquidity right now. The government has little option but to carry on with EPC projects,” said Abhaya Agarwal, a partner at EY Llp who oversees the infrastructure practice at the consultancy. “When the market becomes more balanced, I think the government should look to focus on the annuity model. The government should also be sympathetic to the problem of cost overruns on account of land acquisition and environment clearances and do more to address these issues.”
Although the government has announced a series of measures such as delinking environment and forest clearances, relaxing the exit policy for developers and the lending norms for road projects, it has failed to revive the sector.
The review on Monday will also focus on an update on expressway projects that have been put on a fast track by a steering group of civil servants constituted by Singh in July.
The ministry on 1 September invited requests for qualifications for two such projects—the Eastern Peripheral expressway and the Delhi-Meerut expressway. It will invite similar requests from developers for the Mumbai-Vadodra expressway by mid-December and for the Delhi-Jaipur expressway in January. These highways involve a total project cost of nearly Rs.30,000 crore. The steering group had asked the ministry to award the eastern peripheral expressway by 31 December, the Mumbai-Vadodara expressway by 1 March and the Delhi-Meerut expressway by 15 March. “Certain project-specific issues that could delay the projects will be taken up with the Prime Minister at the meeting so those can be resolved,” said another government official, who also declined to be named.

Premium rescheduling for highway projects gets Cabinet approval

October 9, 2013


The Union Cabinet has cleared a proposal to permit highway developers to postpone their premium repayment.
The Union Cabinet has cleared a proposal to permit highway developers to postpone their premium repayment.



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.


Source- http://www.thehindubusinessline.com

Only 75% toll during work on highways

October 9, 2013


(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.)                                                                               

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.

New bypass road to ease Manali traffic

October 7, 2013

Suresh Sharma, TNN |

MANALI: Tourists visiting the hill station of Manali have some reason to be happy as the town will get a bypass highway and a double-lane bridge soon to decongest the traffic in the narrow roads.According to sources, the new road and bridge will decongest the town and help reduce hour-long traffic jams. As per the plan, a parallel highway will be built from the entry point to Manali which will meet the existing Manali-Rohtang highway at the other end of the town, with the help of a double-lane 120-metre bridge over Beas river.

NHAI sources said the work on the project will start soon after completing the formalities. The project is awaiting execution for over five years, as it was to be built only after four-laning of the Ner Chowk-Manali national highway. But as the state government has transferred the project to NHAI and demand is growing to execute it on priority, work on both bypass and four-lane projects will start simultaneously.

Kullu Manali Paryatan Vikas Manch president Anup Thakur said Manali is in dire need of a bypass highway to keep the traffic moving and that they have got good news from the ministry of transport, road and highways.

Thousands of vehicles enter Manali town every day. Many of them moving towards Rohtang and New Manali areas are forced to enter the town before crossing the congested bridge. Thakur said the narrow highway of Manali was not enough for these many vehicles, resulting in hour-long traffic jams. “The narrow bridges on Beas river are also causing traffic jams and pedestrians face difficulty as the bridge remains occupied by the moving traffic all the time,” he said. Once the bypass is completed, unnecessary traffic will not enter the town, he added.

Project director, NHAI, Satish Kaul said earlier the state government was building the highway and bridge but now it has been transferred to NHAI. “The project has already been approved. Work on both Manali bypass and Ner Chowk-Manali four-lane projects will start simultaneously,” he said.

‘My way or highway’ won’t work

September 26, 2013


Without a change in approach, many road projects will disappear into thin air. — K. Murali Kumar

Without a change in approach, many road projects will disappear into thin air. — K. Murali Kumar

Highway developers should perhaps be allowed to rework premium payments, given the economic crisis.

Should financially-strapped highway developers be allowed to ‘reschedule’ the annual premiums they had offered to pay while successfully bidding for projects? This is becoming a classic case where several government arms want to escape the burden of saying a clear ‘no’, even though they do not want to say ‘yes’.

With a ‘no’, the UPA-2 government risks staining its report card on the highway development front at a time when it — and the economy — badly needs projects taking off the ground. Developers dumping projects isn’t good news when elections are barely months ahead. But a ‘yes’ could also mean taking decisions that the Government’s audit arms may question in future.

For almost six months now, a proposal to permit highway developers to postpone their premium payments in a manner that keeps the net present value of these obligations constant over the entire contract period, has been doing the rounds. It has been, to use official language, “under consideration”, with the Government neither accepting it nor rejecting it categorically.


The entire “under-consideration” exercise started as an attempt by the National Highways Authority of India (NHAI) to prevent developers walking out of road projects that they had won only two-three years ago.

They had done so by quoting high premiums payable to NHAI in return for getting the right to develop or widen highway stretches, maintain these and collect toll from users over a pre-determined period of 20-30 years.

Those were, of course, roaring times when everything seemed to be going right for the economy. So, instead of seeking a subsidy — viability gap funding — most developers raced to bag ‘design-build-finance-operate-transfer’ concessions by offering ever high premiums.

But with economic growth slowing down — from 8-9 per cent at the time of the award of contracts to 4-5 per cent now — and high inflation pushing up project costs, many developers have ‘discovered’ the same projects to be financially unviable and not capable of realising the toll revenues that they had originally projected. And luckily, they have found solace in Government’s inefficiencies, such as inability to get regulatory clearances on time.

Thus, the likes of GMR, GVK and Ashoka Buildcon have laid the blame on environmental/forest clearances and land acquisition. These clearances were delayed to such an extent as to change the entire project finance equations. Besides these developers, there are others too watching from the fringes as of now, although they haven’t served any termination notices on the NHAI.

Currently, there are some 15 highway projects that were awarded in 2011 but are yet to achieve financial closure.


In January, GMR announced its decision to seek termination of a 555-km, six-laning project between Kishangarh and Ahmedabad, while officially citing delays in obtaining regulatory various nods.

The infrastructure company had committed to pay a premium of some Rs 32,000 crore over the project period of 26 years. Interestingly, the Comptroller and Auditor General of India pulled up the NHAI on GMR’s threatened pull-out, saying that it would jeopardise potential premium revenues of Rs 32,000 crore from the project.

It was in this context that the NHAI Board, in March-end, approved a proposal by GMR for premium rescheduling. The approval, however, came with a dissent from the Expenditure Secretary R.S. Gujral and concerns raised by the Planning Commission Secretary Sindhushree Khullar. Both are members of the Board.

Since then, the Ministry of Road Transport and Highways has suggested some changes to frame a common policy for all such cases, involving premium rescheduling.

It sent a note to the Law Ministry for approval. The latter, in turn, turned the proposal down on grounds that it would amount to renegotiation of contracts.

The NHAI Chairman R.P. Singh, on his part, has sought an informed decision from all concerned Ministers. A ‘no’ to the proposal would ultimately endanger potential premium revenues aggregating about Rs 98,000 crore over 26 years, having a net present value of Rs 26,000 crore.

Following the NHAI Chairman’s intervention, the Law Ministry seemingly diluted its stance on the issue, while referring the matter to the Finance Ministry.

The latter, while proposing some riders, agreed to a one-time renegotiation, subject to concurrence from the Law Ministry.

The Road Ministry has since floated a Cabinet note listing all the available options. But what will emerge from all this isn’t clear. This rigmarole was only to be expected, since the proposal eventually involved reworking the norms of a contract that private firms had already entered into with the NHAI.

Contract renegotiation is not an area government officials are comfortable with, more so, given the potential risk of attracting audit scrutiny. And the timing — with elections around the corner and a government already under attack for Coalgate, Spectrum, Commonwealth Games and whatnot — couldn’t be worse.


The Government’s indecisiveness is due to lack of confidence, and there’s some over-defensiveness born out of previous scams.

At the same time, what it needs to also bear in mind is the fact that by not going in for renegotiation and instead allowing developers to exit, it jeopardises potential premium revenues in the future. That is something even the CAG has alluded to.

In other words, for the Government, it is a case of damned if you do and damned if you don’t.

The best way out of this mess is to follow some basics. If the Government decides to renegotiate a contract, it is important to not lose sight of the core aim of such an exercise.

In this case, the purpose clearly is to salvage highway development contracts that are on the whole favourable to the Government — those that can be physically executed on the ground, while protecting the Government’s financial interests.

Second, assuming clarity in regard to the core aim, the renegotiating conditions have to be transparent.

So, if the different arms of government arrive at a consensus proposal, they should discuss the final form of proposal with the developers before taking it to the Cabinet, to get an idea of whether the rescheduling proposal has any takers.

Unilaterally presenting a ‘take-it-or-leave-it’ proposal that developers don’t find viable defeats the very purpose of renegotiation. Else, the Government should have the spunk to say a simple ‘no’ (to any renegotiation)!


Source- http://www.thehindubusinessline.com

NHAI releases money for Panipat-Jalandhar highway repair

September 26, 2013

I P Singh, TNN

JALANDHAR: The National Highway Authority of India (NHAI) has released Rs 17 crore to the Punjab and Haryana governments for undertaking immediate repair and maintenance of NH1 between Panipat and Jalandhar.

The NHAI has also served a notice on project concessionaire Soma Isolux asking it to suspend toll collection as it was not maintaining the highway. “We have released Rs 9 crore and Rs 8 crore to Punjab and Haryana governments, respectively, to ensure that the highway was immediately repaired as commuters were facing difficulties due the bad condition of the road at several places. This amount would be added to the account of the concessionaire,” said NHAI member (finance) Satish Chandra.

 A legal battle is already on between the NHAI and Soma over termination of contract and the matter is pending in the Supreme Court. “Our action asking Soma to suspend toll tax in view of non-maintenance of the road is separate from the termination issue as the concessionaire was supposed to maintain the road, even if the new work was not undertaken,” said Chandra.

He said the NHAI was addressing both issues – to repair the road and to stop toll collection till the project is completed.

Meanwhile, a representative of Soma Isolux said the company had not yet received any notice and it would respond to it after examining it. The company had been maintaining that it would carry out work on the project once the issue would be decided by the apex court. The NHAI has not divided the issues of maintenance and construction and has started cornering the concessionaire on maintenance issues.

It may be mentioned here that toll rates were recently revised by the concessionaire even as fresh work was not undertaken. This had evoked strong reaction from the public and union minister of state for information and broadcasting Manish Tewari, who represents Ludhiana constituency in the parliament, had raised the issue with the road transport and highway ministry.




Darkness on Hyderpora-Tengpora highway risks public life, property

September 19, 2013

  Driving down this south City highway comes with risk to life and property. More than three years after visit of the Chief Minister, Omar Abdullah, to see progress on Hyderpora-Tengpora highway, there has not been much development in terms of lighting and road condition.

 The road, has witnessed a large number of accidents mainly due to absence of streetlights, wrong-side driving, and wandering dogs.
Many pedestrians say they can’t use the road at night because it’s dark and unsafe. Even though streetlights have been installed on the route, they are not operational for the past several years while the concerned departments have failed to take remedial measures.
“The streetlights were on for mere three days after chief minister Omar Abdullah Sahib’s visit to this area some three years ago. And that is it. They put them off forever. It is completely dark road during nights,” said a resident, Khalid Bilal.
Bilal said the darkness suits burglars, who target adjoining localities and shops along the highway.
There have been several burglaries in the area in past three years and many shops have been targeted. In past two weeks at least three burglaries have been reported from the area.
Burglaries are not the only worry. Shopkeepers say the route has become accident-prone. “Any commuter, on way to Pantha chowk, once crosses Tengpora bridge faces a dilemma. He doesn’t know which route he has to take in the absence of streetlights and sharp diversion and this has led to many accidents,” they said.
During nights dogs are seen in the middle of the road posing threat to commuters. Authorities constructed two service roads along the highway from Hyderpora to Tengpora. But both the roads are in deteriorated conditions. Mostly they are being used by the shopkeepers and security forces to park their vehicles.
The residents appealed District Development Commissioner to look into the matter.



GMR sells highway stake for Rs 222 cr to cut debt

September 19, 2013

Shubhra Tandon | Mumbai |
SUMMARY-GMR Highways, part of the Bangalore-based GMR Group, has sold a majority stake of 74% in its Tamil Nadu toll road asset
GMR Highways, part of the Bangalore-based GMR Group, has sold a majority stake of 74% in its Tamil Nadu toll road asset —GMR Ulundurpet Expressways (GUEL) — for around R222 crore to IDFC Alternatives’ India Infrastructure Fund 1 (IIF1).IDFC Alternatives is the alternate asset management vertical at IDFC. GUEL operates the highway stretch of 73 km from Tindivanam to Ulundurpet on National Highway 45 in Tamil Nadu. The project commenced commercial operations in July 2009.

GUEL, along with three other road assets of the company, was on the block for the last six months, and GMR was understood to have been engaged with a host of Indian and foreign investors for the stake sale.

The other three assets up for sale are understood to be an annuity project Adloor Yella-Reddy-Gundla Pochanpalli in Andhra Pradesh, and BOT toll assets of Hyderabad-Vijaywada and Hungund-Hospet.

According to market sources, SBI Macquarie and Morgan Stanley had also looked at these assets for a possible stake purchase. At present, sources say IDFC is in discussions with GMR for other road assets as well. However, IDFC Alternatives managing partner and CEO MK Sinha did not comment on the same.

While GMR and IDFC refused to comment on the valuations for GUEL, market sources say the company would have received about 5% premium on the book value. The originally R800-crore Ulundurpet project saw a cost escalation of about R90 crore during construction, taking the project cost close to R890 crore, say sources.

GMR’s equity investment in the project is close to R291 crore, and the project has a term loan of about R596 crore, the source said. “The toll collected on the project is about R203 crore in the 2011-2012 fiscal,” he said.

GUEL is the second divestment in GMR’s roads portfolio. In February, GMR Highways divested 74% stake in Farukhnagar-Jadcherla highway in Andhra Pradesh to SBI Macquarie Infrastructure Investments and SBI Macquarie Infrastructure Trust for R206 crore.

GMR Group CFO Madhu Terdal said the divestment was in line with GMR Group’s ‘Asset Right and Asset Light Strategy’ and will reduce debt by about R459 crore as on August 31, 2013, on a fully consolidated basis.

Sinha of IDFC Alternatives said, “This investment is our first major acquisition and a step in the direction of implementing our road sector strategy. Given the uncertainty and delays in implementing under construction projects, we will continue our focus on acquisition of operating road assets.”

Analysts say the deal brings in a much-needed breather to GMR, which is saddled with a debt of over R33,000 crore.

“While this deal will help GMR Group to de-leverage and free up capital to be invested in other projects under development, infrastructure focused funds institutions get opportunity to refinance such assets and further enhance their returns on the invested equity,” Centrum Capital head (infra solutions group) Sandeep Upadhyay said.

IIF1 closed in June 2009 with a fund size of $927 million from Indian and international institutional investors. As of June, IIF1 had invested 84% of its total capital across 15 portfolio companies and R250-300 crore is still left in the fund, said Sinha. IIF has investments in over 1,878 lane km of roads in India.




CAG questions highway premium restructuring plan

September 18, 2013

  (Menafn – Hindustan Times – McClatchy-Tribune Information Services via COMTEX) 


The Comptroller and Auditor General (CAG) has raised doubts over the highways ministry’s proposed plan to allow restructuring of premium to be paid by private developers to bag the projects from National Highways Authority of India.


At present, 23 highway projects — awarded in the last 2-3 years — where developers had offered premium worth Rs. 99,000 crore over a 26-year-period are languishing as they are finding it difficult to pay owing to crunch of funds and lack of equity in the market. Some big ticket infrastructure majors including GMR and GVK, who had offered high premiums, have also threatened to pull out of the projects.


To avoid the risk of concessionaires walking out at a time when highway development has already hit a slump, the ministry had proposed to stagger the premium payment as a one time measure without impacting the net present value of the total premium to be paid over the entire contract period. The proposal is likely to come up in the cabinet shortly.


However, the CAG has observed that the proposal is not “consistent” with the concession agreement and can have implications for the bidding procedures used to determine the concessionaire.


India’s top auditor wants the highways ministry to look into the legality of the proposed plan before going ahead with it.


Even the finance ministry that had recently approved the road ministry’s rescheduling of premium proposal advised “extreme caution” because of an “element of moral hazard” in renegotiating concessions post award.


In view of the CAG’s observation, the ministry has recommended two options to the cabinet. The first is to allow rescheduling of premium as a one time measure after levying a penalty of up to 0.5% of the total project for renegotiating the norms of the contract between the developer and NHAI.

The second option is to terminate such contracts and re-bid the projects again. Officials, however, said that because of the ongoing slowdown, the re-bidding might not be able to attract high premiums like before and some of the projects might instead require viability gap funding from the government.



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