Highways ministry seeks prior CAG nod to avoid rap
September 18, 2013
Dipak Kumar Dash, TNN |
The issue of rescheduling premium started when GMR moved such a proposal. When the highways ministry sought opinion of CAG, the auditor said, “Such rescheduling is not consistent with the concession agreement and hence will have implications for the bidding procedures adopted to determine the concessionaire. The legality and other aspects of the process as in the proposed review will have to be decided by the ministry.”
Subsequently, highways ministry had sought law ministry’s view. First, it had turned down the proposal saying it was legally unsustainable, but in the second round said that the ministry should take up the issue with finance. Finance minister P Chidambaram gave conditional approval with a dozen of riders including only extremely “stressed” projects should get this “one-time exception” without impacting the net present value of premium and there should be a provision of “penalty” on those seeking this relief.
Based on this conditional go ahead, the law ministry recorded they have no objection to the tweaking of contract norms, sources said.
But considering that altering already signed contracts can become an issue during audit the ministry has put the proposal before Cabinet seeking decision at highest political level to avoid chances of facing allegation from the CAG or anti-corruption watchdog CVC at a later stage.
The ministry has sited two sides of the proposal. First, if the premium rescheduling is turned down, the NHAI will have to terminate contracts and rebid them. In that case, there is little likelihood of bidders offering premium in the prevailing economic condition. Secondly, if the proposal goes through then majority of the projects might roll out soon.
Rescue plan for highway-projects
September 17, 2013
morungexpress
Earlier, Sibal had noted that the rescue plan only has financial implications and it was the finance ministry’s opinion, and not his, that was required. In the process, even he had overturned the opinion of a joint secretary in his ministry.
Sibal’s reconfirmation and the subsequent approval of the Cabinet Committee on Economic affairs presided over by Prime Minister Manmohan Singh will not only defer the payments by 6-10 years but also allow a major discount on the annul premia.
Among the 23 concessionnaires, tasked to build 3,450 km of highways, GMR group was the first to throw its hands up on the 6-laning of a 555-km highway costing Rs.5,387 crore from Kishangarh to Udaipur in Rajasthan and further to Ahmedabad in Gujarat.
Road contract award far behind year’s target
August 7, 2013
BS Reporter | Mumbai
If construction companies were pinning their hopes on a steady flow of highway projects in the current financial year, they might have to wait longer. A report by CARE Research says the National Highways Authority of India (NHAI) will be able to award only one-third of its current target.
The Union Ministry of Road Transport and Highways had set a target of awarding around 9,000 km of road projects in 2013-14. CARE Research expects that road projects with the length of about 3,000 km would be completed.
“The target seems to be unattainable, given the continued impediments faced by the road sector. Delay in obtaining land, forest and environmental clearances, coupled with a slowdown in macro economic conditions continue to hit projects in the sector,” the report said.
Analysts say the state-of-affairs of slow order inflows of the last financial year will continue to the first half of the current financial year as well. Many of them had expected NHAI to award as much as 3,000-4,000 km worth of projects in the first half of the year.
“The first half will see dull ordering but there is hope that the second one would be good. It all depends on how government will process infrastructure projects,” said Viral Shah, senior research analyst-infrastructure, Angel Broking. The broking firm has also taken a conservative estimate of L&T’s order inflow growth. While the infrastructure major guided a 10 per cent growth, the firm expects it to be at around 8-9 per cent, indicating a tough environment ahead.
NHAI’s delayed targets would affect construction companies as 50 per cent of awards were supposed to be on the engineering, procurement and construction (EPC) model. In 2011-12, awards and road project wins on build, operate and transfer (BOT) mode could not raise debt, as banks became cautious. Many such projects had aggressive bids by project developers.
Some projects which sought bids last year, saw lack of interest from developers as well. “Almost 10 road projects worth Rs.14,800 crore received no bids or witnessed bidding cancellation in 2012-13,” said CARE Research.
However, slow execution of highway projects, might see a pick-up this year. “The execution of already awarded road projects will improve in FY14. The upcoming elections are expected to expedite the execution of road projects in this fiscal. Also, the recent judgment by the Supreme Court, on delinking environment clearance from forest clearance will provide some fillip to the project execution,” the report said. According to estimates, road length of about 2,700 kms would be constructed in 2013-14.
While NHAI’s programme might be slower in the current financial year, state government project awards have picked up pace. The report believes that the annual investment will grow at 16 per cent in the Twelfth Five Year Plan.
Source-http://www.business-standard.com
Government’s recent efforts for revival of highways sector end up non-starters to policy gaps
August 5, 2013
By YASHODHARA DASGUPTA, ET Bureau
NEW DELHI: The government’s recent efforts to revive the highways sector will turn out to be a non-starter because the new rules have inherent gaps, road developers have told Prime Minister Manmohan Singh and Finance Minister P Chidambaram.A long-awaited policy notified last fortnight to unlock equity funding for new projects by letting concessionaires exit ongoing and completed highway projects will not help bring any new investments or FDI into the sector since it’s mired in legal, taxation and commercial mess, developers have said.
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In June, the government had approved a policy that would allow substitution of concessionaires in highway projects at any stage as long as financial closure had been achieved. This was done to revive the sector – marked by dramatic fall in investments — by freeing up equity and using it in new projects that are not taking off for want of buyers.
“The current circular has failed to address the issue of unlocking of equity in healthy, operational projects that will release about Rs 6,000 crore of equity in older concessions. This would have also brought serious, long-term FDI to road sector,” National Highway Builders’ Federation (NHBF) has said in a missive to the prime minister and finance minister.
“The policy has a large number of legal, commercial and taxation challenges that investors and sellers would not be willing or prepared to deal with,” they added.
Industry members have pointed out that the policy does not include projects where financial closure is not achieved despite the fact that there are several such projects because the authority has not fulfilled its obligation.
However, road ministry officials said allowing substitution where financial closure has not been achieved would mean giving complete leeway to developers which would be detrimental to the PPP framework and that an NHAI default is already covered in the existing model concession agreement (MCA).
The letter also points out that it is not clear whether completed projects include partially completed ones and projects that have received provisional COD. It is also unclear whether the incoming entity can get the tax benefits available for infra projects.
According to M Murali, director general at NHBF, the government’s intention will not succeed with this route since the substitution mode will not be acceptable. “The process is also long, confusing and would involve more expenditure. Also, what’s the point of imposing a penalty on exiting developers when they are already stressed in the first place,” he said. The penalty clause however, said government officials, was opposed by the road ministry but it was included at the insistence of the finance ministry.
Meanwhile, NHAI officials said that international players, including sovereign funds, have expressed interest in taking over existing projects where developers are interested in selling their stake.
Source-http://economictimes.indiatimes.com
Massive infusion of funds for developing 6418 km of highways in Northeast India
August 3, 2013
Union Minister for Road Transport and Highways Oscar Fernandes who was in Guwahati on Friday reviewed the progress of National Highway works.
Fernandes said that a high-level meeting chaired by Prime Minister Dr Manmohan Singh was held on July 18 last to review the status of development projects in the region and discussed steps to accelerate the same.
The ministry has decided to carry out a feasibility study for the newly declared National Highway NH-127 B connecting Srirampur (on NH-31 C) to Phulbari via Dhubri including construction of a bridge over river Brahmaputra. Besides improving the connectivity for Assam, this would also provide an alternative shorter connectivity between Nongstoin in Meghalaya with West Bengal and will provide greater access to Assam and Meghalaya.
The ministry has technically vetted the proposal of the Ministry of DONER for construction of a new bridge across river Barak to connect Silchar town as an alternative to the existing Sadarghat Bridge and widen the NH-37 between Numaligarh — Jorhat — Demow — Dibrugarh to 4-lane standards on BOT ( Annuity) basis.
Secretary to the Ministry of Road Transport and Highways Vijay Chibber also announced that from now onwards all works by Public Works Department and Border Border Roads Organisation (BRO)will be implemented under EPC (Engineering, Procurement and Construction) mode instead of the conventional item rate contract system for effective implementation of projects.
Source-http://economictimes.indiatimes.com
Parking on double yellow lines could be allowed
July 30, 2013
Motorists could be allowed to park on double yellow lines for up to 15 minutes under plans mooted by the Conservatives.
Under the proposals drivers would be able to park free of charge for a short period while picking up goods from shops. They would also be able to leave their cars in bays for longer without being fined.
Parking and waiting on double yellow lines is currently prohibited for all vehicles. The only exceptions are vehicles that are making commercial deliveries and pick-ups, blue badge holders and the emergency services.
Some local authorities already allow motorists to park free of charge for up to 30 minutes close to shops and Conservative ministers in the coalition Government are to keen to extend that to help high streets.
According to the Daily Telegraph, sources close to communities secretary Eric Pickles said that “over-aggressive” parking enforcement was one of the reasons why so many shops were struggling.
The source said: “The High Street is in danger of shrinking or dying off, and over-aggressive parking enforcement is part of the reason why.
“If people are worried about paying a fortune in parking fines, it will make them more likely to do their shop online or go to out of town shopping centres. For too long parking has been a revenue raiser. It’s time to end that.
“There is room for a deal [with the Liberal Democrats]. Dangerous parking is a menace to people, whereas if you’re in the parking bay or just on the side of the road you’re not presenting any risk.”
Source -http://www.highwaysmagazine.co.uk/
Exit norms relaxed for road developers
July 30, 2013
MAMUNI DAS
A long-pending proposal from highway developers seeking a relaxation of the exit clause — which allows an investor with deeper pockets to replace a promoter facing financial stress — has now been approved.
The move is likely to increase the M&A activity in the road sector.
The Cabinet Committee on Economic Affairs (CCEA) has approved this proposal. The substitution of developers can be done with the approval of NHAI, lender and private developer. At present, there are limits on the extent to which a developer can exit.
“We hope, with this, a number of stalled (road) projects, can now move forward,” Union Finance Minister P. Chidambaram said.
Earlier, the National Highways Authority of India (NHAI) Chairman R.P. Singh had said that banks should be allowed to replace a cash-strapped developer with a financially healthier substitute rather than declare the project a non-performing asset on its balance sheet.
This proposal had been supported by the Highways Ministry as well, which had felt that any developer unable to work on a highway development project should be allowed to exit as long as another firm is willing to take its place. The only condition for this change will be that the replacement must meet the same technical qualifications.
Also, in case the original project developer had defaulted in earlier obligations, then the NHAI can put a penalty on the original developer.
The new highway
July 30, 2013
The NHAI must revert to the older model of funding projects and leaving construction to private players.
The Government’s move to allow developers of highways under the public-private-partnership (PPP) route the leeway to exit from projects immediately after they are commissioned will help infuse some liquidity into a sector where companies are struggling to raise funds. The majority of highway developers in India are contractors whose core strengths are in engineering, procurement and construction (EPC), and not in assuming the financial risks of operating and collecting toll from completed projects over a 20-30 year concession period. In contrast, are those investors with sufficient resources — from private equity firms to sovereign wealth funds — wanting to acquire road projects, but unwilling to take the risks of construction. By permitting developers to shed their entire equity, even in projects awarded on a build-operate-transfer (BOT) basis right after commissioning, the Government has essentially facilitated the sharing of risks — between those in a position to bear them until construction is complete and others only interested in managing the operational assets. In other words, a perfect fit.
The above ‘exit’ flexibility should, in fact, have been granted much earlier, ever since PPPs were made the preferred mode of executing highway projects. The shift to PPPs led to a situation where erstwhile EPC contractors, who undertook work on projects directly funded and bidded out by the National Highways Authority of India (NHAI), suddenly became full-fledged BOT developers. This was a job they were really not equipped for, made worse by onerous restrictions that forced them to stay invested right through the concession period of projects. In a scenario of high interest rates and tightening of lending norms by banks, the inability to divest stakes even in existing projects only compounded the liquidity problems of developers. The ultimate casualty here was the highway programme. With developers having no money to bid for new projects, the NHAI could award just 1,116 km of roads under PPP in 2012-13 as against 6,491 km the previous year.
Exiting from completed projects may help generate the much-needed liquidity for developers. But it will still not be enough to restore the kind of investor interest in highway development witnessed until a couple of years ago. The fact that a large number of PPP projects bidded out in 2011-12 are yet to achieve financial closure highlights the seriousness of the crisis in the sector. For the time being, the Government has little option but to go back to the older EPC model where the NHAI funded the projects and handed out construction contracts to private players. If nothing else, it will keep the highway building programme going and inject liquidity amongst contractors who may be enthused to bid for PPP/BOT projects as and when the overall economic situation improves. The NHAI must be made to speed up its process of awarding EPC contracts and the Government should untangle the regulatory thicket — particularly, in the environmental sphere — coming in the way of project implementation.
India approves major highway widening projects in Assam and Madhya Pradesh
June 20, 2013
The Government of India is set to launch four road-widening projects worth Rs46.2bn ($849.14m) on the national highways in the states of Assam and Madhya Pradesh.
Approved by the Cabinet Committee on Economic Affairs (CCEA), the four new projects cover three developments in Assam and one in Madhya Pradesh.
The work in Assam will widen National Highways 37 (NH-37) under the Special Accelerated Road Development Programme North Eastern Region (SARDP-NE) Phase A at a cost of Rs19.33bn ($355.15m).
NH-37 projects also include the Rs8.74bn ($160.7m) four laning of the 80km Jorhat-Demow section, the Rs4.73bn ($87m) four laning of the 46km Demow-Bogibil junction, and a Rs5.84bn ($107.3m) four laning of the 51km Numaligarh-Jorhat section.
All three projects in Assam will be executed on a design, build, finance, operate and transfer (DBFOT) basis in a build-operate-transfer (BOT) delivery mode, and will speed up the improvement of infrastructure in the state, while increasing employment potential for local labourers.
In Madhya Pradesh, the CCEA approved the four laning with Paved Shoulders of the Jabalpur-Bhopal section of National Highway 12 (NH-12) under the National Highways Development Project Phase III, on a DBFOT basis in a BOT mode of delivery.
The Rs26.86bn ($493.28M) project will reduce the time and cost of travel for traffic on NH-12 between Jabalpur and Bhopal.
http://www.roadtraffic-technology.com
Road Ministry to approach CoS on GMR highway project in 2 weeks
June 19, 2013
By PTI
NEW DELHI: The Road Transport Ministry will approach the Committee of Secretaries for an amicable way out for the Kishangarh-Ahmedabad Highway project which is stalled after GMR’s exit.GMR Infrastructure BSE 0.50 % early this year had walked out of the project citing difficulties in taking up the project due to regulatory hurdles, including delays in environment clearance and land acquisition.
According to sources, GMR Infrastructure was ready to restart the project with some preconditions, including making piece-meal payments.
The Law Ministry, however, had already rejected the developer’s preconditions, including piece-meal payments, for resuming work on the project.
“We are going to the Committee of Secretaries (CoS) on the matter,” Road Secretary Vijar Chibber told reporters here. He said the meeting of CoS may take place in the next 10-15 days. The CoS is headed by Cabinet Secretary Ajit Kumar Seth.
The company has also said it would pay about 50 per cent of the amount to restart the work on project at present and pay the remaining sum including interest in subsequent years.
The Ministry and the company are already in discussions to rescue the project.
Sources added that the proposal from the Ministry is to ask the company to make requisite payments in time and to seek its guarantee to ensure that the project is not abandoned mid-way, leading to financial burden falling on government.
The project is estimated to have required an investment of Rs 5,387 crore. The Bangalore-based group had won the project in western India through international competitive bidding in September 2011 at Rs 636 crore annual premium for 26 years.
NHAI had said that the company exited the project on account of financial hurdles in arranging finance for the project and not due to lack of regulatory clearances.
It is to be implemented through the Public Private Partnership (PPP) model on Design, Build, Finance, Operate and Transfer basis.
Source-http://economictimes.indiatimes.com
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