Foreign cos take to highways

February 22, 2008

New Delhi, Feb 22 Indian road construction projects seem to have caught the fancy of large foreign players in a big way. Out of five successful bidders for projects to widen four lane highways to six lanes which were announced today, foreign companies have equity stake in four of them.

Four international companies, namely, Dubai-based Emirates Trading Agency, Deutsche Bank, IJM Corporation, Berhad (Malaysia) and Isolux Corsan group of companies from Spain have teamed up with Indian companies and have equity stake ranging from 10 to 51 per cent, the Secretary, Road Transport and Highways, Mr Brahm Dutt, said here today.

These are the first tranche of projects bid under the new model concession agreement (MCA) that works on a revenue-share basis .

Earlier, road development projects were awarded to companies which offered upfront money to the Government to operate the six-lane highways. Now, the Government would receive part of the revenues generated through toll collections during the agreement period.

In the projects announced today, 882 km of four-lane national highways would be converted to six lanes at a total cost of Rs 10,912 crore.

The private firms would not only foot the entire construction cost, but also share a part of total revenue earned with the Government during the 12-15 year period.

Since the traffic on highways is expected to surge over time, the extent of revenue share will go up over the project life.

At the initial end of projects, National Highways Authority of India (NHAI) would mop up revenue share ranging from two per cent to 48.06 per cent. At the end of the concession period, NHAI would take a share of 12 per cent to 59 per cent.

In these projects, since four lane roads already exist, concessionaire can start collecting revenues from road users within 180 days of the signing of the agreement with NHAI. The toll revenues would be routed to an escrow account, said the NHAI Chairman, Mr N. Gokulram.

More such mega-projects are lined up for the next financial year. “We expect to invite bids for widening about 2000-2500 kilometres of four lane highways in the next financial year,” said Mr AV Sinha, Member-NHAI.

In the previous bidding method for two such projects, NHAI received an upfront negative grant of Rs 975 crore from L&T Toubro, and Ideal Road Builders.

Source: thehindubusinessline.com