Indian officials ask Freight Forwarders’ Association of India to conduct a dry run to study the feasibility of using a road route between Iran and Azerbaijan, according a report on Mint.
India is trying to get easier access the markets of Russia and former Soviet republics. Source: RIA Novosti
India, which is exploring a free trade agreement with the Customs Union of Russia, Belarus and Kazakhstan, is pondering over using a road link between Iran and Azerbaijan, to get easier access the markets of Russia and former Soviet republics, Mint said on its website.on Monday. India’s commerce ministry has asked the Freight Forwarders’ Association of India (FFAI) to conduct a dry run to study the feasibility of using the road route between Rasht in Iran and Astara in Azerbaijan, the paper said.“We are trying to completely explore the route through a cost benefit analysis,” the paper cited an anonymous Indian commerce ministry official as saying. “The idea is to use the infrastructure as it is present today. The plan to build the rail is going on separately.” The official told the paper that FFAI would submit a report on the feasibility of the route by February or March.
For the last six months, India has been trying to persuade Iran to build the 165-kilometre missing rail link between Rasht and Astara, but no concrete agreement has been reached.
“It is very important to keep India economically engaged in the region because there is a lot of untapped potential,” Ram Upendra Das, a senior fellow at Research and Information System for Developing Countries told the paper. “Irrespective of our economic relationship with other countries, this would be a new region to expand our trade.”
The paper added that India faces a growing imbalance in its trade with Russia, with the latter maintaining a $2.2 billion trade surplus as for 2012. That figure is unlikely to come down in 2013, although it is widely believed that Russian exports to India have fallen this year.
After a gap of over a year, the government is set to award a highway project in the build, operate and transfer (BOT) category in what marks its effort to revive the public-private partnership (PPP) model in the sector. According to sources, the first PPP project of this fiscal in highways will soon be awarded to Mumbai-based IRB Infrastructure Developers for widening a 98.72-km stretch between Solapur and Yedeshi in Maharashtra to four lanes.However, the project, estimated to cost R972 crore, would be supported by viability gap funding (VGF) of 19% by the National Highways Authority of India (NHAI). Many stranded PPP projects in the sector were awarded on promises of high premium payments to the authority. “Given the poor response to the BOT projects these days, IRB’s proposal appeared to be better than what the NHAI had expected,” said a senior government official, asking not to be named.
Inability to meet toll revenue targets had forced investors like GMR, GVK and Ashoka Buildcon to quit their PPP projects in the highways sector and caused delays in other projects. Termination of projects awarded on the promise of high premiums to NHAI by the most prominent investors has resulted in renegotiation of premiums worth R98,000 crore payable over 20-30 years. Policymakers have since shifted focus to the conventional engineering, procurement and construction (EPC) projects, and not one new PPP project has been awarded in the sector this fiscal.
The details of the premium recast will be as per the Rangarajan panel’s recommendations, which is expected soon.
The number of new PPP projects awarded in the sector peaked in 2011-12 at 6,491 km and has since come down to 1,116 km in 2012-13.
In September this year, the Cabinet Committee on Economic Affairs had given its approval for widening the Solapur-Yedshi section of National Highway 211 in Maharashtra under the National Highways Development Project (NHDP) Phase IV on a design, build, finance, operate and transfer pattern.
While no new PPP project has been awarded this fiscal, one project was re-awarded — six-laning of the 122.88-km Barwa-Adda-Panagarh section of NH2 to IL&FS Transportation Networks in May.
Both the road ministry and NHAI have attributed the sluggish investor interest in PPP projects to not only the economic slowdown and resultant difficulty in meeting toll collection targets but also several loopholes in the model concession agreement. Developers had been vocal about financial stress, non-availability of land and uncertainty over securing environmental clearances as among various reasons behind not showing interest in bidding. Similarly, the government had also decided not to launch any bid without having all statutory clearances in place. This, according to senior officials, was the reason behind the poor awarding scenario in the current fiscal.
After the Solapur-Yedshi stretch, the government is likely to bring out another bid for a four laning project in Rajasthan, which is at a nascent stage. If this project also takes off, it will be the second project awarded on PPP mode in the current fiscal.
NHAI has a modest target to award 125 km on BOT mode this fiscal, while the target for EPC projects is set at 1,875 km. The ministry has revised its target for total awards by all agencies from 9,000 km last year to 5,600 km this year, including the 2,000 km to be awarded by NHAI.
IRB undertakes development of various infrastructure projects in the road sector through several special purpose vehicles. The company, along with its subsidiaries, has constructed, operated and maintained around 8,000 lane km of road length so far. The aggregate size of all its BOT projects (completed and under execution) is around Rs. 17,055 crore.
India’s highway-building programme is in crisis. This is partly due to its very ambitious scale, which means that public funds are not adequate to meet the programme’s demand for capital, given the swiftness with which roadsneed to be rolled out. There are other reasons as well. The crisis is also caused by the government’s inability to design auctions that eliminate unrealistic bids and delays that, in some cases, are a direct outcome of tardy clearances and regulatory hassles. The road sector’s problems have also arisen because the government’s private sector partners failed to take into account the effect a growth slowdown would have on their revenue, or were too ambitious in their forecasts. Thanks to a combination of these factors, not even a single build-operate-transfer (BOT) project was awarded in the first six months of the ongoing financial year, indicating the degree to which the private sector has soured on road-building. Basically, nobody wants to touch it.
In October, the government set up a panel under the chairman of the Prime Minister’s Economic Advisory Council, C Rangarajan, to figure out if there was a way out of this conundrum. The panel had some difficult decisions to take. In particular, many existing highway concessionaires wanted to defer the premiums that were due to the National Highways Authority of India, or NHAI, under the BOT system. The premium, which can range from Rs 3 crore to Rs 680 crore a year, is to be paid out over 20 to 25 years, increasing by five per cent every year. The total premium due over the next few decades is Rs 1.5 lakh crore. But the fact that revenues have not matched estimations means that many companies are grumbling about having to pay out. The government, meanwhile, alert for once to the concern that the private sector is trying to feather its own nest at the expense of the public exchequer, may reportedly want to cut off the payment of dividends by road-building companies – usually special purpose vehicles, or SPVs – to their parent company as long as premiums to the NHAI are still outstanding. Another possibility that the Rangarajan panel is considering is reducing the upfront payment of premiums for the next few years by a fixed proportion – 75 per cent, in fact. The NHAI has already argued for a low discount rate and against penalties for private developers.
It is certainly true that the private sector must stay involved in road-building in India. The government cannot pay for everything. And something must be done to enable stalled projects to move forward. However, an arbitrary and opaque mechanism is a very bad idea; nor should the private sector be allowed to dictate terms. The government must take account of the fact that just giving into demands for renegotiation sets up a severe moral hazard problem, and that it also renders past auctions unfair and future auctions problematic. Thus, two criteria should be front and centre in the final decisions taken by the government. First, the mechanism for dispute settlement should be transparent, consistent and independent. Second, it should not unduly benefit the private sector. In fact, there should be clear penalties – regardless of the request from the NHAI – for anyone who has delayed a project. This should include the government, since in some cases private developers have suffered because the government has sat on clearances for five years. Transparency and financial accountability are essential to clean up India’s vital roads sector.
NEW DELHI: To push road construction in border states and to improve inter-state connectivity in these regions, highways ministry has moved a proposal to set up a company to implement road construction in these areas.
The ministry has circulated a note seeking comments from other ministries before the proposal is officially put before the Cabinet for approval. “The company will function under the ministry. Majority of the road projects in the north-east, Uttarakhand and some stretches in Jammu and Kashmir and Himachal Pradesh will be implemented by this company. We have proposed that the realignment and redevelopment of major NHs in Uttarakhand will be brought under its jurisdiction,” said a ministry official.
Sources said quite a few of these road projects are likely to be funded by Japan International Cooperation Agency (JICA) and Asian Development Bank.
Most of the roads likely to be brought under the new company are with the Border Road Organization (BRO). Sources added that there have been concerns over slow progress of road construction in border areas and these were also raised in the national security council.
TOI had first reported the ministry’s move to rude the load on BRO, which is “overstretched” with other commitments so that it can “concentrate more on strategic roads”.
The government proposes to reschedule premium obligations of the developers of some of the financially-stressed highway projects that are under various stages of execution or are abandoned by the developers owing to various reasons.
The government move comes in the backdrop of near stagnation or a lack of progress in implementing a majority of the 53 projects for developing 6,415 km of highways, awarded during the UPA’s second term.
While a majority of these are stuck due to financial reasons, some 4,000 km of projects where construction is yet to start the reasons are mainly regulatory roadblocks or non-availability of land.
The National Highways Authority of India (NHAI) has awarded these projects on a design, build, operate basis and developers have secured the right to collect tolls on the basis of the premium they offered to pay.
The Madras High Court has directed the National Highways Authority of India (NHAI) to pay the compensation amount due to an octogenarian woman, whose land was acquired for widening road near Tambaram. Justice S Manikumar, who gave the direction, pointed out that the woman is now over 80 years old. The NHAI has not paid any money for the land taken over from her five years ago.
As right to property has been recognised by the Supreme Court as a human right and considering the age of Siriyapushpam, her legitimate right to seek compensation for the land acquired must be paid, the judge said. The judge hoped that the authorities would implement the directions of this court in letter and spirit within the stipulated time.
Siriyapushpam’s land measuring 165 sqm in Irumbuliyur near Tambaram was notified for acquisition by the NHAI in 2008 for widening, maintenance, management and operation of NH 45. As she was not given any compensation for more than five years, she filed the present petition.
NHAI’s counsel informed the bench that Rs 43 crore has been sanctioned. The TN government counsel told the court that the special district revenue officer (land acquisition) would determine the amount for disbursal to the persons concerned. He also requested the court to specify time limit for completion of the process. Justice Manikumar, stipulating that necessary compensation amount should be deposited not later than one month, said persons such as Siriyapushpam should receive their compensation as expeditiously as possible. He directed the government counsel to communicate the court’s order to the authorities for ‘prompt implementation’.
NHAI to get permission for road to pass through elephant reserve
The National Highways Authority of India (NHAI) is in the process of getting clearance from the National Board of Wildlife, for 8 km of the proposed Chennai-Bangalore Expressway.
The green field project road will pass through 7 km of the Royal Elephant Reserve in Andhra Pradesh, and about 300 metres of the Mahimandalam forest in Vellore district.
Officials at NHAI said that after having made changes in the alignment, they needed about 67 acres of land in the elephant reserve.
“Under the earlier alignment, the road cut across the forest in four locations but that has been brought down to just one location now,” explained an official.
The Union ministry of environment and forests (MOEF) had recently asked the NHAI to identify routes used by elephants so that underpasses could be built for vehicles. “The project consultant has already studied and suggested two underpasses. We have also requested the district forest officer, Chittoor, to look at our proposal,” the official said.
The MOEF had also asked the NHAI to explore the possibilities of utilisation of fly ash in embankment construction, to look at the possibility of cooled mix technology instead of the regular hot mix and for details of water bodies along the alignment of the project.
“These are all under preparation presently and we are likely to get MOEF clearance in a year’s time by when land acquisition is likely to be completed,” the official said.
The six-lane, access-controlled road will be 262 km long and require around 2,600 hectares of land. The expressway, which has been proposed under the National Highways Development Project, will pass through Tamil Nadu, Andhra Pradesh and Karnataka and take the Kolar, Chittoor route.
On completion, it will be an alternative to the two existing roads to Bangalore – the one passing through Kolar and Chittoor and the Hosur, Krishnagiri and Walajapet route.
Real hurdles: Under the new proposal, in the most optimistic scenario, 10-12 out of 53 premium-based projects may be revived.
Regulatory delays, rising cost, drying up of bank funding are major worries
NEW DELHI, DEC:
The Government’s proposed premium rescheduling package may help financially-strapped highways projects already under various stages of execution.
But it is unlikely to help much if the aim is to jump-start over 4,000 km of projects where construction is yet to start.
There are three main reasons for this.
The first is project delays, for which the Government’s own tardiness in giving environmental and forest clearances, and making available encumbrance-free land to developers, are partly responsible.
In fact, GMR Infrastructure cited precisely the above factors while issuing termination notice on the National Highways Authority of India (NHAI) for six-laning of a 556-km stretch from Kishangarh to Ahmedabad via Udaipur in January.
Even the idea of premium rescheduling — wherein developers could postpone these payments even while keeping their net present value over the entire concession period unchanged — was floated almost a year ago when GMR itself proposed it to preserve the viability of the single largest project awarded during the UPA regime.
The NHAI Board had even approved GMR’s proposal in March. But no decision has since been taken.
But delays in regulatory clearances have led to increased projects costs. That constitutes the second reason why mere premium rescheduling may not help.
Delays equal Cost
The last two years have, moreover, seen road construction costs rise by an average of 10 per cent a year. Prices of bitumen have gone up sharply. The same is true for diesel, cement, and labour costs, even if to a lesser extent. “For a project costing Rs 2,000 crore, construction costs have gone up by Rs 200-250 crore a year,” claimed Sudhir Hoshing, CEO-Roads Business at Reliance Infrastructure Ltd.
Besides, toll revenues have slowed. The highway projects in which developers bid aggressively by offering to pay high premiums were all awarded prior to 2011-12 when the Indian economy was clocking 8-9 per cent growth. Most of them are today unviable.
Banks wary
The third reason is drying up of bank funding.
Banks — mainly State Bank of India, Canara Bank, Syndicate Bank, Punjab National Bank, Oriental Bank of Commerce, Bank of India and ICICI — have outstanding exposure of Rs 1,31,000 crore to the road sector as of March 31, 2013. Increased project costs and slowing toll collections have now made them cagey about lending.
“Even for projects that achieved financial closure in 2012, banks insist on doing fresh due diligence. They are re-evaluating if the projects are feasible and whether the promoters are willing to put in additional equity,” said a senior NHAI official.
That being the case, the Government may have to go beyond premium rescheduling to even partially compensate developers for increased project costs on account of regulatory delays.
The most optimistic scenario, according to an infrastructure analyst, is of 10-12 out of the 53 premium-based projects being revived by the proposal now under consideration.
The only other alternative before the Government is to cancel projects that are heading nowhere and re-invite bids. “They may not fetch the kind of attractive premiums that developers had committed earlier. But we those know those premiums will anyway not accrue,” the analyst pointed out.
JAIPUR: Finally, after being at loggerheads for several months on various issues regarding widening of Jaipur-Gurgaon stretch of national highway (NH-8), the state government andNational Highways Authority of India (NHAI) has reached a consensus on two major impediments. NHAI received an estimate for the relocation of two high-tension power (HTP) lines on Wednesday, while the state government handed over the land at Sanjay Van to the authorities.
After dilly-dallying for 20 months, the Jaipur Vidyut Vitran Nigam Limited (JVVNL) has given the total costing for the relocation of two HTP lines from Jaipur bypass. The JVVNL will roughly take two months for processing the tender and another two months for shifting it after which NHAI is expected to start construction in the patch.
NHAI is examining the estimate and clarification submitted by the electricity board and is likely to take final decision on it soon. The issue was pending with the Jaipur discom for past many months leading to a delay in widening the stretch. However, after a team of engineers went to Japan to study the technology for transfer of lines, the JVVNL has agreed to initiate the work.
In another major breakthrough, the state government provided land to the concessionaire for carrying out work at Sanjay Van. Earlier, the government was demanding construction of a boundary wall from the developer in lieu of handing over the forest land, which NHAI rejected. It maintained that a payment of Rs 1.15 crore has already been made to forest department as a part of compensation. After intervention from the officials of NHAI and state government, the issue was finally settled.
“Our efforts are on to remove all hindrances for all the national highway projects in the state including important linkage between Delhi-Jaipur. I am hopeful that most of the issues will be sorted out soon and inconvenience caused to commuters will be reduced to minimum possible extent,” said AK Mishra, chief general manager (technical-NHAI), Rajasthan.
Jaipur: After locking horns for several months on various issues in widening of Jaipur-Gurgaon stretch of national highway (NH -8), the state government and National Highway Authority of India reached a consensus on two major impediments. NHAI has received an estimate for the relocation of two high tension power (HTP) lines on Wednesday while state government has handed over the land at Sanjay Van to the authority.
After dillydallying for 20 months the Jaipur Vidyut Vitran Nigam Limited has given the total costing for the relocation of two HTP line from Jaipur bypass. The JVVNL will roughly take two months for processing the tender and another two months for shifting it after which NHAI is expected to start construction in the patch.
NHAI is examining the estimate and clarification submitted by the electricity board and is likely to take final decision on it soon. The issue was pending with the Jaipur discom for the past many months leading to delay in widening of the stretch. However after a team of engineers went to Japan to study the technology for transfer of lines, the JVVNL has agreed to initiate the work.
In another major break through, the state government provided land to the concessionaire for carrying out work at Sanjay Van. Earlier, the government was demanding construction of a boundary wall from the developer in lieu of handing over the forest land, which NHAI rejected. It maintained that a payment of Rs. 1.15 cr has already been made to forest department as a part of compensation. After intervention from the officials of NHAI and state government issue was finally settled down.
“Our efforts are to remove all hindrances for all the national highway projects in the state including important linkage between Delhi-Jaipur. I am hopeful that most issues will be sorted out soon and inconvenience caused to commuters will be reduced to minimum possible extent” said AK Mishra, chief general manager (Tech), Rajasthan.
SURAT: Surat Municipal Corporation (SMC) proposes to build an expressway to give a single point entry and exit for vehicles to the upcoming express highway and the National Highway (NH) 8.
The project has been envisaged as the vehicle population in the city, which is 22 lakh at present, is likely to double by 2020. Also, 20,000 vehicles come in and go out of the city daily. All these vehicles pass through the city roads to reach the National Highway from Kamrej to Kadodara.
The project will be undertaken on Build, Operate, Own and Transfer (BOOT) basis. There will be no financial burden either on the SMC or the state government. SMC and Surat Urban Development Authority(SUDA) will have to give only right of way to the contractor who builds the facility. He will collect toll from the passing vehicles to recover the cost of the project.
“We need a link way that facilitates people from all sides to go out and enter the city without any interruption. The express link way can help us on this count,” said Jatin Shah, city engineer, SMC.
This express link way would be linked to roads emerging from Rander, Athwa, Puna, Varachha and the Ring Road.
If materialized, it would be the first of its kind link way in the country. Major Asian cities like Bangkok and Hong Kong have such link roads for entry and exits to the city.
“We are looking at the link road as an extension to the Outer Ring Road,” said Manoj Das, municipal commissioner, Surat.
The road and building department of the state government is studying the feasibility of the project. SMC will make financial provision in its budget for the year 2014-15 only to initiate the process, sources said.
