Projects must differentiate between small contractors and large ones, and new avenues of financing must be explored, says SK Kulkarni.
A recent post by National Highways Authority of India (NHAI) in its newly created Facebook wall reads “The road to success is always under construction”. For most of the industry watchdogs, who have been witnessing the road sector for the past decade may not be surprised if at all the post meant in its literal sense.
The average daily distance travelled by a truck in India is about 300 km, far less than the world average of 600-700 km. Poor and unsafe roads, poor maintenance overloading, physical barriers at state and city boundaries for checking and security purposes, and delay at the terminal points will render it difficult to achieve desired double-digit growth.
Opportunity in disguise
With a strained exchequer and to give quality a paramount importance, government had to resort to private sector participation for creating infrastructure, hitherto financed entirely by central and state governÂments. This move had an additional benefit of bringing in private sector efficiencies to infrastructure sector. Any hindsight would reveal that this move from the government has paid off to a larger extent with the creation of projects like Delhi International Airport, which was completed with private participation in a record 36 months.
In the roads sector, with the creation of National Highways Authority of India (NHAI) mandated for implementation of the ambitious National Highways Development Programme (NHDP), road development gained momentum. NHDP aims to develop more than 50,000 km of National Highways at a massive investment of about Rs 300,000 crore. With scanty government finance, a large portion of this quantum will be funded through private sector as BOT projects. The government also plans to award many of the four-lane projects to private parties as Operate, Maintain & Transfer (OMT) contracts. The success of NHDP programme in attracting large number of highway developers has prompted many state governments to replicate NHDP model for their state highway development programmes. Gujarat, Madhya Pradesh, Haryana, Andhra Pradesh and Punjab are in the forefront implementing state highway deveÂlopment programmes.
Reforms needed in the sector
The massive National Highway Development Programme (NHDP) has been fraught with implemÂentaÂtion problems resulting in delays and has caused concern equally among policy makers, practitioners, multilateral agencies, lending institutions, potential investors, end usÂers and concessionaires. The programme, initially desiÂgÂned to be completed by 2015, has not even reached half of its target. Land acquisition and utility shifting had been the primary reasons for delay of the programme. At last, however, the governÂment has made efforts to remove some bottlenecks.
Last year, comprehensive reforms were carried out in consultation with all stakeholders. This included changes to Model Concession Agreement (MCA), implemÂenÂtaÂtion of BK Chaturvedi committee recommendations, which have helped greatly in reducing the time taken in awarding projects. As a result, although bidding activity has been increased in the last one year, implementation challenges remain unanswered. The highly fragmented market structure and intense competition (sometimes unÂreasonably) calls for aggressive and timely reforms in
the sector.
Projects must be customised to suit various categories of market from small contractors to large developers and new avenues of financing must be explored. Feedback mechanisms should be strengthened to bring in accounÂtability among various stakeholders. It is important for stakeholders to balance socio-economic development and viability under commercial framework.
The author is Head-Business Development,
GMR Highways.
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