Govt okays Rs 774-cr road project in Rajasthan under NHDP
September 13, 2013
Source- PTI
The Cabinet Committee on Economic Affairs (CCEA) gave its nod to two-laning of the Uniara-Nainwa-Hindoli-Jahajpur-Shahpura-Gulabpura section of NH-148D in Rajasthan for Rs 774.33 crore.
The government today approved a highways project worth Rs 774.33 crore in Rajasthan to be built under its flagship road building programme, National Highways Development Project (NHDP). “The Cabinet Committee on Economic Affairs (CCEA) has given its approval for two-laning with Paved Shoulders of the Uniara-Nainwa-Hindoli-Jahajpur-Shahpura-Gulabpura section of NH-148D in Rajasthan under the NHDP Phase IV, on Engineering, Procurement and Construction (EPC) basis,” an official statement said. Also read: Law Min agrees to equity sales for PPP road projects The cost of the 204-km project has been estimated at Rs 774.33 crore. The project will expedite improvement of infrastructure in Rajasthan and also reduce the time and cost of travel particularly for heavy traffic plying on NH-148D between Uniara-Nainwa-Hindoli-Jahajpur-Shahpura-Gulabpura, an official statement said. This stretch connects three National Highways — NH-79, NH-12 and NH-116 — and passes through three districts of Bhilwara, Bundi and Tonk. This stretch will help in improving the socio-economic condition of this region of the State. It will also increase the employment potential for local labourers for project activities, the statement said.
Source- http://www.moneycontrol.com/
Salem-Ulunderpet road cuts travel time by half
September 12, 2013
By Express News Service -
The widening of 136-km stretch between Salem and Ulunderpet had been completed and collection of toll has begun, said Reliance Infrastructure Limited which executed the project.
The project, executed on the Build-Operate-Transfer (BOT) pattern, under the aegis of the NHAI, was awarded to RInfra to operate and maintain for a concession period of 25 years.Built at a cost of Rs 1,061 crore, the Salem- Ulunderpet corridor connects major tourist destinations and industrial zones in Salem district with Chennai International Airport. Sudhir R Hoshing, CEO (Roads), Reliance Infrastructure, said, ‘‘The Salem- Ulundurpet road will provide a hassle-free, safe and smooth driving experience.’’
Source-http://www.indianexpress.com
Upgradation of approach roads in Wazirpur industrial area begins
September 12, 2013
PTI
Delhi government envisages making Delhi a hub of clean, high technology and skilled economic activities, he added.
He said the services of Wazirpur Industrial Area, spread over 210 acres, were taken over from North Delhi Municipal Corporation (NDMC) in December last year.
“Total length of all roads of Wazirpur Industrial Area, with road width varying from six to 25 metres, is 18.6 kilometres.
Almost all the roads of the industrial area were in a dilapidated condition. The work of improvement of major approach roads would be completed within six months at a cost of Rs 13 crore,” Yusuf said.
The industrial area is on the top of production of stainless steel products and exported goods worth Rs 1,000 crore per annum.
The scope of work includes redevelopment and up-gradation of 2,829 metre length with cement concrete roads, he said, adding DSIIDC intends to upgrade the infrastructure of the industrial areas by improving roads and drains as well as footpaths.
India, China to sign cooperation pact in road sector
September 12, 2013
Dipak Kumar Dash, TNN |
Sources said the identified areas of cooperation include sharing best practices in road and bridge building technologies, policies, intelligent traffic system besides road-related issues. China has taken huge strides in building world class highways, and has built over 60,000 km of expressways. Plans are afoot to build around 18,000 km of expressways in India.
Around half-a-dozen road projects are being built with participation of Chinese companies. Sources said all these projects were bagged by private entities in which Chinese firms had a share.
Sources said no project has been identified that can be taken up under this cooperation. “This is just a beginning. As we progress, projects will be identified,” the official said.
The other major area of cooperation will in the electronic mode of collecting toll (ETC). China is way ahead of India in this sector. India also plans to bring all toll plazas on national highways under ETC so that people can pass through all plazas using a single smart card.
India and China will also cooperate in the field of intelligent traffic system, vehicle specifications and their certification. While India is likely to benefit from Chinese sharing of information and knowledge, China will learn from India’s success in implementing public-private-partnership projects.
Last year, former highways minister C P Joshi had reached out to Chinese infrastructure companies to invest in the road sector. He had said around 40 road construction projects were being undertaken by companies from China, Russia, the UK, Dubai, Singapore, Italy, South Korea, Malaysia, Spain and Thailand.
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
Roads: Opportunity for new players?
August 3, 2013
The need of the hour is positive policy making from government while private sector should contribute by innovation and informed risk taking, writes Sudhir Hoshing.
Indian roads sector is undergoing an evolutionary phase where the government is putting forth several public-private partnership (PPP) models (such as BOT, EPC, OMT, etc) in order to attract the interest of private players for efficient and effective development of the backbone of the nation’s economy. In terms of number of projects, roads and highways are emerging as the favoured destinations for PPP with 53 per cent projects in PPP from road sector.
Sector challenges
The sector, however, witnessed several constraints and financial stress due to inordinate delays in land acquisition, long-winding processes for obtaining statutory clearances, revenue leakage due to toll non-compliance, economic slowdown, etc. These problems led to investors shying away from bidding for any new projects in 2012-13.
The average number of bidders in 2012-13 was five, with 13 projects attracting no bidder at all. This is clearly a drastic drop over the average of 20 bidders during 2011-12. Given drying up of equity markets and lenders apprehensive to lend to the sector, weaker players will find it tough to raise funds. Out of the 32 national highway projects awarded during 2011-12, 18 projects have not succeeded in obtaining the financial closure. The number of projects failing to achieve financial closure further shoots up to over 30 considering projects awarded in 2012-13 as well.
Government response
The government began deliberating on various measures to revive the waning investor interest and put the sector back on the growth path. Alternative sources of project funding are being explored by the government including, but not limited to:
100 per cent government funding through EPC contract, since there are very few takers for BOT projects due to equity crunch.
Encouraging credit enhancement schemes being introduced by companies like IIFCL: Under such schemes, the institution provides partial credit guarantee to enhance the ratings of the project bond thereby enabling channelisation of long term funds from fairly untapped sources such as insurance companies and pension funds etc.
Exploring funding through Infrastructure Debt Funds: The IDF would seek to raise debt capital from domestic as well as foreign resources and invest in projects under the PPP model that have completed a year of operations.
In addition to the above, the government considered a slew of measures to revive the sector, such as:
Grant of partial COD if 75 per cent construction is complete and balance is stuck due to land acquisition issues: Provisional Completion Certificate shall be issued by Independent Engineer/ NHAI for the portion completed and the concessionaire shall be permitted to do partial tolling on the completed portion.
Linkage of NHAI-estimated Total Project Cost to Wholesale Price Index: Usually there is a variation between government’s project cost estimates and developer’s estimates due to cost and time over runs between the initial bid and award stage. This would substantially reduce with the inflation-indexed mechanism being considered by NHAI to appraise Total Project Cost (TPC). NHAI guarantees 90 per cent payment of debt to the lenders in case of termination but it recognises only its own TPC. So, banks have greater risk in lending for a project where the TPC is higher than the NHAI estimate. Termination payment in inflation-indexed mechanism would however be inflation-adjusted, thereby adequately addressing the risk of lenders.
Delinking environment and forest clearances: Proposals of over 20 highway projects, which had already been recommended for environmental clearance last year, are stuck because forest or tree cutting clearances had not come through. Construction work can now begin on these stretches and NHAI can start allowing commercial operations date for four-to-six laning projects, a move that will allow developers to start collecting tolls. Extension of time required to achieve financial closure: The concessionaire is liable to gather its funds for the project within 180 days of the date of awarding the project. If it fails, it can request for a grace period of 120 days more after paying a penalty. However, beyond that, if the firm is unable to submit its sources of funds, the project stands cancelled. It is then either rebid or awarded to the second lowest bidder. NHAI has in some instances allowed the concessionaire more than 300 days for financial closure, where the project was stuck due to reasons beyond the control of the concessionaire. For example, in case of Kota-Jhalawar highway project in Rajasthan which was stuck due to delay in securing statutory clearances, NHAI extended the deadline for financial closure beyond 300 days.
Consideration of loans extended to highways sector as secured loans: The finance ministry has urged the Reserve Bank of India to consider a change in its stance that treats loans to road projects as unsecured, as this makes banks wary of lending.
Early exit options for highway builders after completion of construction: Under the norms in place since November 2009, developers must hold at least 26 per cent of equity up to two years after the COD. The ministry is examining the possibility of easing such restrictions and consequently freeing up equity capital of the developer locked in operational projects. While the move is intended to clear ground for new investors in the funds-starved sector, the departments of economic affairs and expenditure of the finance ministry feel that non-serious investors wanting to make quick capital gains could misuse the proposed facility.
Consolidation phase & opportunities ahead
Of late, the sector seems to be headed towards consolidation with several developers looking to divest their stake in BOT projects. GMR recently sold 74 per cent stake in its subsidiary, GMR Jadcherla Expressways. SBI Macquarie, Uniquest Infra Ventures (Malaysian government sovereign wealth fund Khazanah Nasional Berhad and IDFC JV) are noted to have expressed interest in many road projects. Such secondary market deals would offer a good proposition to buyers having adequate funds to take on the projects. Availability of 50 road projects worth Rs 50,000 crore totalling 5,000 km are on the block in the secondary market with no takers for most of these projects.
Further, as per announcement on Budget 2013, most of the proposed 3,000 km of highways would be awarded on EPC basis. There are many regional players who have expertise in EPC but they shy away from BOT projects as they are not in a position to block their investment for 20 to 30 years and face traffic risk. These regional players will look for EPC opportunity in the areas where they already have their resources mobilised. Thus, they could benefit from EPC projects of size less than Rs 500 crore, where they could earn good returns due to regional presence. The ministry is looking to award projects on Operate, Maintain and Transfer (OMT) basis. A model concession agreement for operation and maintenance of national highways through private players on OMT basis has already been approved. The OMT model is very similar to the Build, Operate and Transfer model except that in case of the former, instead of construction, operation and maintenance, the private entity’s responsibility stands confined to just operation and maintenance of highways.
However, the recent OMT projects that were out for bidding had capex ranging from Rs 50 crore to Rs 100 crore and equity commitment of at least 33 per cent stake during the entire concession period keeps small players, having the requisite expertise, from participating in such projects. This means that pure service providers without balance sheet strength will not be able to participate in such projects, especially given shorter concession period.
Overall, the opportunities are difficult to identify and serious players who can withstand the challenges will be able to survive. The need of the hour is positive policy making from government while private sector should contribute by innovation and informed risk taking.
Source-http://infrastructuretoday.co.in
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
Joint roadworks permit scheme given go ahead
July 30, 2013
(Surrey and East Sussex county councils have entered a joint roadworks permit scheme that is designed to reduce congestion on the counties roads.)
Transport Secretary Patrick McLoughlin has given both councils control over when utility companies and other businesses dig up the roads, with firms needing to apply for a permit before they can begin any roadworks.
In Surrey alone around 45,000 roadworks take place annually, costing the county’s economy just under £100 million due to the congestion they cause.
Reducing roadworks in Surrey will save the county’s economy millions of pounds every year through greater coordination of activity and stricter controls over when and how roadworks are carried out.
Local Transport Minister Norman Baker said: “Roadworks may be necessary, but it can be incredibly frustrating for people when they get stuck in traffic jams.
“That is why we have given Surrey and East Sussex County Council the power and the freedom to take greater control of how its road works are organised and co-ordinated. This will not only help to reduce congestion in and around the county, but provide a better service to drivers, cyclists and passengers.”
John Furey, Surrey County Council’s cabinet member for transport and environment, said: “This will mean that rather than simply informing us of roadworks, companies will have to ask permission to work in a road for a specific period of time and specified purpose. So if two separate companies wanted to work on the same road, we could request they carry out their work at the same time. This means the road would only have to be closed once, halving congestion.”
The initiative will be called the South East Permit Scheme, paving the way for other councils to join in the future. It is due to come into effect this winter.
Source-http://www.highwaysmagazine.co.uk/
PM sets Rs 1.15 lakh cr investment target for PPP projects
July 30, 2013
PTI
In a bid to ramp up investor sentiment, Prime Minister Manmohan Singh today set an investment target of Rs 1.15 lakh crore in PPP (public private partnership) projects across infrastructure sectors in rail, port and power in the next six months.
The proposals include Mumbai elevated rail corridor (Rs 30,000 crore), two international airports in Bhubneshwar and Imphal (Rs 20,000 crore) and power and Transmission projects (Rs 40,000 crore).
The decisions were taken at a meeting Prime Minister held here to finalise infrastructure projects for 2013—14 which was attended by Finance Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Ministers of Power, Coal, Railways, Roads, Shipping and Civil Aviation.
The meeting decided that the proposal for creating a rail tariff authority will be accelerated and brought before the Cabinet soon.
The Prime Minister highlighted the need for ramping up investment in infrastructure to revive investor sentiment.
“For this purpose, a target of rolling out PPP projects of at least Rs 1 lakh crore in the next six months was set. A steering group is being formed to monitor the award and implementation of projects on priority basis,” said a PMO release.
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.
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