Govt to set up infra trust funds to spur investments

September 24, 2013

Road Ministry to award 6,500 km of projects on EPC basis in 2013-14

The Union government is looking to set up an infrastructure trust fund, similar to real estate investment trusts in countries such as Singapore, by November to spur investments in the infrastructure sector.

India’s infrastructure sector has been struggling for the past few years due to lack of investments as banks have been wary of lending due to policy constraints.The government is looking to improve investments in the sector even as the parliamentary elections are less than a year away.

Under the infrastructure trusts, the underlying revenue of a projectwill be transferred to a trust, which will issue units to investors, including foreign investors who want to buy the units.

“A major reason why some PPP (public-private partnership) projects in the infrastructure sector have run into problems is that many private partners did not price the risk in projects over a 25-year time frame. We are looking to set up an infrastructure trust fund in two months to ensure long-term management of projects,” said Arvind Mayaram, secretary, department of economic affairs.

Mayaram added the government was looking to develop the corporate bond market and encourage the Employees’ Provident Fund Organisation (EPFO) to invest in infrastructure projects.

Meanwhile, in a move to boost investments in the road sector, the ministry of road transport and highways is also looking to award close to 6,500 km of road projects through the engineering, procurement and construction (EPC) mode in 2013-14.

“We are planning to award 6,500 km of road projects on the EPC basis this year,” said Vijay Chhibber, secretary, ministry of roads.

The ministry has been actively looking to award projects on the EPC basis for the past few years as a number of projects have been struggling since they were awarded on the build-operate-transfer (BoT) model. The ministry will also award three major expressway projects by the end of the year, according to Chhibber.

The move comes at a time when the road ministry has been able to award only 1,400 km of road projects against a target of 9,500 km in the last financial year.

Under the EPC model, the government spends the entire money required to build roads unlike the BoT mode, where the constructor builds a project and charges a toll on the same.

The ministry has also said an independent road regulator will be in place before the end of the year and the authority is expected to play an adjudicatory role and advice the government on existing road projects in addition to working on the toll mechanism in the country.

“There have been contrarian views on a road regulator and we think we need a road regulator’, Chhibber said.

Road projects in the country have been held up since the past few years due to various reasons, including the Delhi-Gurgaon Expressway. The government had awarded close to 3,055 km through the EPC mode in 2005-06, but has since managed to award less than 500 km through the EPC route. Meanwhile, BoT projects continued to perform better during the years and the ministry managed to award more than 6,400 km in 2011-12 alone.

Meanwhile, the government is also looking to set up a fund to promote debt and equity investment in the infrastructure sector. “There will be greater deepening of the equity and bond markets for financing the infrastructure sector in the next few months,” Mayaram said.

The government is also looking to set up an International Trust Fund where the underlying revenue of a project will be transferred to a trust which will issue units to investors, including foreign investors who want to buy the units, he added.

Source-http://www.business-standard.com

Connecting India: It’s still a long, bumpy road ahead

September 18, 2013

By Raghav Chandra

 (When commercial competitiveness…)

 

 

The last three years have been remarkable for Indian road infrastructure: projects of 15,000 km were awarded during 2010-13. Yet, there is a huge task ahead. A decade ago, the bulk of the programme was done via the public funding route, today, 90% of highway development is undertaken via public-private partnership (PPP): on a design, build, finance and operate basis, where the private sector is involved in the entire project life cycle and shares commercial risks.

 

Surprisingly, many bids received did not ask for viability-gap funding and, instead, went for a hefty premium. While such flamboyant bids were a recognition of the unforeseen and untapped multiplier and induction effects of highways networking, they underlined the importance of private funding and effective implementation of contracts.

 

Some of the most strategically important cities of India are being connected now: for instance, Ahmedabad-Vadodara and Kishangarh-Udaipur-Ahmedabad would connect with Delhi-Jaipur-Ajmer-Kishangarh-Mumbai-Surat-Vadodara to complete the Delhi-Mumbai corridor. Similarly, Gwalior-Shivpuri and Shivpuri-Dewas would fill critical links for another alternate corridor connecting Delhi and Mumbai via commercial Indore. Similarly, Amravati-Jalgaon-Dhule would help connect Hazira port in Gujarat to Paradip port in Odisha and eventually mirror the East-West corridor along India’s economic hinterland of Gujarat and Maharashtra all the way to Kolkata.

 

But when the economy hits a speed breaker, the projected network externalities appear exaggerated and committed financiers pull back. When a single project languishes, it has a domino effect on all others whose viability suddenly becomes suspect. In normal times, there are challenges of financing because of an asset-liability mismatch and exhaustion of exposure limits of banks. Today, highway development requires stronger commitment to tide over wavering macro fundamentals. Besides, there are many roads of low-commercial viability in economically-backward areas that can only be undertaken through public funding.

 

But the most critical challenge today is on the implementation side. The National Highways Authority of India is overloaded and focused largely on award of projects. Contract management and oversight to ensure quality construction, maintenance and completion has taken a backseat under the PPP model. The private sector faces a dearth of managerial resources that can competently handle complex issues involved in coordinating with a multiplicity of governmental and local agencies.

 

While PPP models are useful to support fiscal constraints, they are not perfect panaceas. The government cannot afford to depend on the efficiency of the PPP developer. The former needs to nudge, cajole and guide the concessionaire and work with him to make him fulfil his commitment without compromising on standards, quality and timeliness. The regulatory capture of the independent engineer is a reality that cannot be ignored and discounted.

 

Further, the involvement of state governments has been missing despite their key role in facilitating acquisition of land, shifting of utilities and providing security and encroachment-free passage for uninterrupted right of way. States, along with their city governments, need to build their own connectivity corridors and spruce up main district roads and municipal roads by adopting innovative methodologies that leverage land and development rights. States should establish Road Development Corporations and vest them with adequate authority and resources. Having the chief minister as the chairman and the chief secretary as the vice-chairman, a model adopted in Madhya Pradesh in early 2004, will ensure highway development gets strategic support.

 

The challenge is speedy award of remaining highways and effective implementation of already awarded ones. Development of high-speed corridors between important urban centres and specialised connectivity projects is the need of the hour. It is not enough just to have a highway that connects two important points.

 

When commercial competitiveness is defined by the speed and reduced cost of transaction, it is imperative to have safe access-controlled travel and effective last-mile connectivity.

(The writer is an IAS officer. Views are personal)

Source-http://articles.economictimes.indiatimes.com

 

 

Rescue plan for highway-projects

September 17, 2013

morungexpress

New Delhi, September 15 (IANS): Frustrated by several jammed highway projects, plans are afoot to re-negotiate contracts worth Rs 99,000 crore ($15.2 billion) with some of the private players in a bid to give them payment concessions, instead of imposing penalties.
According to official sources, a grand rescue plan, billed as a one-time measure, is in the final stages of government approval and involves 23 concessionnaires (the private parties) and a total project cost of Rs.34,000 crore ($5.2 billion).
Finance Minister P. Chidambaram and Road Transport and Highways Minister Oscar Fernandes have okayed a moratorium of 6-10 years on the premia due from them. Law Minister Kapil Sibal has been asked to reconfirm if this plan is legally and constitutionally tenable.
This, even after a senior official in the office of the Comptroller and Auditor General found fault with the proposal and aired the opinion on the relevant file.
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.
The law officer had said renegotiation was “neither desirable nor permitted at (such) a belated stage… (and was likely to) open a pandora’s box among equally-situated persons having contracts with the NHAI (National Highways Authority of India)”.
The authority is the intended beneficiary of Rs.99,000 crore, as the money is expected to be used by it to build roads elsewhere in the country, mainly as a social obligation.
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.
The National Highways Builders Federation, in fact, wants a sweeter deal.
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.
The company has a legal liability to pay government-owned highways authority an annual premium of Rs.636 crore. But the nodal ministry has found, instead, that GMR’s annual proceeds from charging toll already exceeds Rs.715 crore. Out of 23 select concessionnaires, some no doubt are in distress. The more fortunately placed are also happy to join the chorus of economic downturn and claims of incapacity to raise the requisite debt or equity. The highways authority has backed this reopening of contracts citing national interest.

Source-http://www.morungexpress.com/

17 structures delinked from NH-8 project

September 12, 2013

TNN |

 

JAIPUR: For early completion of the Jaipur-Gurgaon stretch of National Highway-8 , the National Highway Authority of India (NHAI) has re-structured the project by delinking the 17 most contentious structures, giving some relief to the concessionaire and the state government.With only 32 out of the total 83 structures completed till date, the authority has deleted nine of them from the blueprint. In 17 others, officials claimed that work is going at adequate speed. NHAI is targeting to set up another eight by March 2014. The 17 de-linked structures will be taken into consideration only on availability of land.

“In our meeting with the state government earlier, we expressed our inability to continue with the original scope of work. We have delinked 17 structures from the project and will take them up later based on availability of land. This will allow us to focus on other portions where land is available and complete them at the earliest ,” a senior official of NHAI said.

The delinking will have its impact on nearly 8-10 km of the stretch where it will have rough patch while the rest of the route can be expected to be smooth. Highlighting the need for taking such a decision, A K Mishra, regional manager of NHAI, said, “Our aim is to provide clear passage to the commuters so that they face minimum inconvenience and enjoy their ride between Jaipur and Delhi. Restructuring will also give us room to carry forward the work in areas where it can be done at the earliest and coming on other portions later.”

The meeting held on Tuesday between officials of the state government and NHAI too resolved down several contentious issues. The state government has allowed the developer to carry out work at Sanjay Van and also agreed to shift two HT lines from the Jaipur bypass.

On the insistence of the state government, NHAI assured to construct the 12 government buildings which will demolished for the project. It also assured of taking up of maintenance work on the diversion if the concessionaire fails to complete it in 60 days of time.

However, nodecision was made on the issue of charging toll tax in the wake of incomplete work on the road.

The matter has been kept in abeyance and will be discussed later.

Committee set up to improve 1,700 km roads in TN

September 12, 2013

 

An empowered committee has been formed to ensure better coordination between various departments for implementing a project to improve 1,700 km of roads across Tamil Nadu in a time-bound manner.

The Union Department of Economic Affairs had proposed the Tamil Nadu Road Sector Project-II for accessing the $300-million assistance from the World Bank. The committee will be headed by the State Minister of Highways and Minor Ports as chairman.

The committee, while having the Minister as chairman, will have Chief Secretary, Principal Secretaries to Finance and Highways and Minor Ports Departments besides Project Director of the Tamil Nadu Road Sector Project as members.

The action plan for the project, approved by the government, involves financial strategy such as tolling of high-density traffic corridors, levy of cess on motor fuel and /or motor vehicle tax and ring fencing into State road fund.

Source-http://www.infranews.in

Punjab govt initiates Rs 13,000 crore road connectivity project

September 12, 2013

The Punjab government today launched a programme of Rs 13,000 crore to connect all major cities and towns in the state with 4/6 lane expressways.

The state has 1,739 km of National Highway of which 405 km have already been upgraded to 4 lane and the construction of 4/6 laning of more than 650 km of highways is on full swing.

 

The state government has chalked out an ambitious plan to construct quality roads along with the banks of major rivers and canals flowing through the state to provide shortest route.

 

These projects would have dual benefit as besides developing shortest routes, we would also be able to strengthen the embankments of these water channels thereby containing any flood like situation

 

Source-http://www.newsonprojects.com

Land acquisition delays force NHAI to scrap six projects

September 11, 2013

Manu Balachandran  | 

Industry players say cancellations could deter private investments

 

 The Centre’s ambitious plan to kick-start development of critical infrastructure, including roads, during an election year has hit a barrier with the National Highways Authority of India (NHAI) deciding to scrap six projects worth Rs 4,000 crore due to land acquisition hurdles.NHAI is mandated to acquire land to develop national highways. It has so far scrapped four projects in Goa and Kerala and has now decided to let go off two more this year in Kerala, said a senior NHAI official. The projects could have added more than 420 km to the highway network. NHAI was looking to widen the national highways running through these states.

V K Sharma, chief general manager for land acquisition at NHAI, told Business Standard:  “So far, we have terminated four projects in Kerala and Goa and we are in the process of terminating two more in Kerala. Land acquisition also remains a hurdle in West Bengal, but we have not scrapped any project there.”

Kerala and Goa are the only states where the authority has given up projects due to land acquisition troubles this year. This could be a deterrent to private sector investments in the country, according to industry players.

“These decisions send out a wrong message to investors. Land acquisition has to be done with coordination between state governments and NHAI,” said M Murali, director-general, National Highways Builders Federation (NHBF). The enactment of a new land acquisition law could help make acquisition easier for public utility projects, he added.

Undeterred by the six projects being scrapped, NHAI is now looking to acquire 10,000 hectares during the current financial year. It has acquired 4,000 hectares and looks to award 9,000 km of road projects during the year. “We have already acquired 4,000 hectares this year and we have set a target of 10,000 hectares for the year. We are certain that we can achieve that,” said Sharma.

The land acquisition target for the year is more than 50 per cent over the last years achievement when NHAI acquired 6,669 hectares.

Last year, the road transport ministry could award only a little more than 1,000 km of road projects and the prime minister had expressed concern over the delay in road development. The delay, largely caused by environmental clearance and land acquisition problems, had kept many private sector investors away from road projects. Last year, as many as 13 projects received no bids from the private sector.

According to the road transport ministry, a little more than 30 projects are delayed due to land acquisition troubles. West Bengal, Kerala and Assam each accounted for at least six projects. According to the existing norms, NHAI should take over 80 per cent of the total land before inviting bids from investors to develop projects. The remaining 20 per cent has to be completed within three months of awarding the project.

According to the National Highways Builders Federation, the criterion is not met in most instances with NHAI struggling to acquire land on a stretch and instead acquiring in a fragmented manner, which makes development difficult.

Experts have also pointed to NHAI’s inability to plan well after it had to scrap the projects in the states. “Kerala and Goa have limited land availability and the state governments have been opposing the plans to acquire land for roads. The NHAI should have studied the situation more closely before planning to undertake the projects. But with the number of vehicles on the rise, the state governments should also look at a sustainable model,” said Vishwas Udgirkar, senior director at consultancy firm Deloitte Touche Tohmatsu.

The Ministry of Road Transport has been trying to revive interest in the road sector through a slew of measures including amendments in the exit policy for private developers and rescheduling the premium that the developers owe the National Highways authority.

 Source_http://www.business-standard.com

 

 

 

 

 

 

 

 

 

 

Stalled road projects: NHAI for painless termination of contracts

September 11, 2013

 

OUR BUREAU 

 

NEW DELHI, : The National Highways Authority of India (NHAI) has asked the Highways Ministry to deal with developers in a way that project contracts are cancelled amicably and insulated from future claims.

The NHAI’s move comes in the backdrop of road developers rejecting the conditions put forward by the Finance Ministry for allowing postponement of premium payment for highway projects that are currently stalled.

CANCEL PROJECTS

Instead of having a solution that is unworkable, it would be better to foreclose these projects amicably and re-bid rather than waste time in trying to revive these projects, said R. P. Singh, NHAI Chairman, in a letter last week to Vijay Chhibber, the Road Ministry Secretary. Singh suggested that the Ministry may form a committee to deal with developers.

According to an official source, the Road Ministry, in a proposal for the Unions Cabinet’s consideration, has suggested various options for rescheduling the premium, including cancelling the projects.

NO MORAL HAZARD

The Chairman also objected to the use of the term “moral hazard” by the Department of Economic Affairs (DEA) in reference to the proposal for rescheduling premium.

“Use of lexicon such as moral hazard, penalty, haircut, convey the impression that we are doing something out of the way for the concessionaires (developers). On the contrary, NHAI is trying to salvage contracts, which are in our favour,” Singh has said.

The Finance Ministry, while using these terms for the proposal, had supported one-time renegotiation, subject to from the Law Ministry as well as imposition of penalties.

The NHAI Chairman suggested that instead of financial penalties, the Government could use this opportunity to impose more stringent conditions, which would help the public and prevent developers from raising further financial claims against NHAI.

These conditions include stopping developers from charging toll for four-to-six projects in case they do not meet project milestones. Similarly, developers who seek such premium rescheduling, can be asked to commit that they will not raise any claims on account of any delays by NHAI in getting regulatory clearances.

At stake are several highway development projects awarded about three years back , which had committed a premium of over Rs 90,000 crore to be paid to the Government over 20-30 years.

The premium offered had a net present value of about Rs 26,000 crore.

Due to the slowdown, many developers, who had won highway development projects two to three years ago promising high premium, are now unable to implement the projects.

To continue operating the projects, the developers now want to postpone their premium payment in a manner that its net present value (NPV) is unchanged.

Premium is the amount offered by a highway developer to NHAI in exchange for the right to develop, maintain and collect toll from a highway for 20-30 years. The amount, which is payable every year, is arrived at through competitive bidding.

[email protected]

Source-http://www.thehindubusinessline.com

Government to scrap slow-moving highway projects

August 23, 2013

 

By YASHODHARA DASGUPTA, ET Bureau
  

 

Government to scrap slow-moving highway projects

(Government to scrap slow-moving highway projects)
NEW DELHI: To revive India’s stuttering highway building efforts, the government may scrap several existing contracts that are making little progress on the ground. The road transport and highway ministry has asked the National Highways Authority of India to review all languishing projects and identify those that can be terminated on contractual grounds, so that they can be bid for all over again.The move comes in light of the fact that several projects awarded in recent years are either stranded midway or have been complete non-starters. The road ministry also wants the same clarity for those stalled projects that could benefit from deferral of premium payments.

It will re-circulate a Cabinet note on its proposal to allow financially stressed developers to defer payments of premia that they had committed to pay to win the highway projects. An additional option of cancelling the projects and re-bidding them would now be included in the note.

Road ministry officials said this note, which has been modified based on the finance minister P Chidambaram’s advice on the matter, will be sent to the Cabinet so that a final call can be taken at the highest level and the projects can finally start moving again.

“A clear decision needs to taken. We have asked NHAI to find out how many projects can be terminated. The decision on what to do for projects that fall under the premium restructuring case will be taken at the Cabinet level. But for the rest, we can decide on a course of action now,” said a senior road ministry official familiar with the issue, adding that NHAI has also been asked to determine which of the premium-based highway development project are indeed stressed and thus, deserve a bailout.

“We are studying around 35 highway projects of which 23 are premium-based (with premium of close to 1 lakh crore) and the rest are based on viability grant funding. We will basically divide the projects into four categories – projects where developers are ready to operate under the original parameters as long as we fulfill all our obligations, projects that should be terminated with penalty where the concessionaire has defaulted, projects which should be terminated without penalty where both the concessionaire and NHAI have failed to meet obligations, and those where developers are sitting on the fence and awaiting more clarity from the policy end,” said an NHAI official adding that the NHAI board will deliberate on this list in this in their upcoming board meeting on August 22.

The highway authority is reviewing whether these 35 contracts can be terminated either for developer default, NHAI default or both and the NHAI board will deliberate on this in their meeting later this week, the official said.

NHAI has been batting for the premium restructuring proposal that would allow developers in stalled projects to restructure their premium payment so that the financial stress is relieved. However, in May, the law ministry rejected it on grounds of legal and constitutional feasibility following which the road ministry referred the matter to the Committee of Secretaries (CoS) who did not support the proposal citing the law ministry’s objection. In July, after a fresh request from the road ministry, the law ministry backtracked on their previous advice and instead said the matter should be resolved between the finance and road ministries.

Earlier this month, the FM wrote to road minister Oscar Fernandes cautioning him of the ‘moral hazard’ in renegotiating contracts post-award and that the law ministry’s permission must be taken.

 

Source-http://economictimes.indiatimes.com

Mott MacDonald wins contract for metro project in India

August 17, 2013

Mott MacDonald has secured a contract from Hindustan Construction Company–Samsung joint venture for providing detailed design services for phase III of the Delhi Metro project in India.

 Pursuant to the contract, the company will provide geotechnical, civil and structural engineering services for contract CC34, which is part of the Janakpuri West to Kalindi Kunj metro corridor. The project is due for completion in 2016.

The scope of work involves designing and construction of a 4.5km tunnel from Janakpuri West to Palam. The tunnel will be built using shield tunnel boring machine. The other component of the project includes construction of underground metro stations at Janakpuri West, Dabri Mor and Dashrath Puri as well as interchanges with existing elevated metro stations.

Mott MacDonald Group Limited provides engineering, management, and development consultancy services to public and private sectors worldwide. The company is headquartered in Croydon, the UK.

 

Source-http://www.worldconstructionnetwork.com

 

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