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AKS Chauhan, COO, GR Infra elaborates on why it is mandatory for the industry to improve on the project execution front.
Is the present regulatory regime conducive to the growth of the roads & highways sector?
The regulatory regime primarily includes the government, whether it is the federal or state government. Then there is another dimension to this regime: consultants, who too play an important role. However, the role of consultants has got marginalised under the present circumstances. They are responsible for making good design briefs and feasibility reports. Consultants are responsible for project execution on behalf of the concerned government authority. They are, however, not being given the right kind of atmosphere and timelines to prepare well for projects. That´s why we are failing in most of the projects, for there are either cost or time overruns. Consultants are not getting to conceive all the aspects of a particular project.
When you mention regime, you mean policies, and policies of the present government are excellent. Even in the past, irrespective of the contractual undertakings, policies were good. If you work as per the contracts signed between two parties, you are simply respecting the contract. The authority´s representatives and consultants have to perform their duty as per the terms of contract and the executing agency; that is, the contractor or the concessionaire. If they perform their duties as per the provision of a contract, there will be no problems whatsoever. The problems we are facing today are on account of policies at level of implementation. People are either plain ignorant about those policies, or of the spirit behind those policies, or there are vested interests involved. That´s why projects are suffering.
Do you mean to say that consultants are not advised realistic timelines?
Sometime back a responsible Union minister made a statement that was widely reported. While elsewhere engineering reports (ER) are prepared in four, five or six years, and projects completed within the stipulated timelines, we in India prepare detailed project reports (DPRs) in six months and complete the project in 10 years. Timelines are important. But then sufficient time should be given to generate necessary data on a project, and on how it will be engineered and constructed. These things should be clearly defined at the time of the feasibility study itself. Otherwise, when a contractor takes on a project, he will simply not know from where to begin with. I have always maintained that policies are very good. There has even been further improvement in them over the last two years. But the way policies are modified, you might not be able to see desired results on the ground.
Since you have enumerated the challenges, what is the scope for improvement?
Even the best of systems have the possibility to improve. We in India definitely do not have the best of the systems in place at the moment. As I said earlier, the role of consultants should be clearly defined at the time of project conceptualisation. For their part, the authorities need to properly educate their execution-level engineers. Several modes of construction exist at this point in time. Earlier there was the item rate contract, then came BOT toll and annuity, then came EPC on a lump sum basis, and now there is the hybrid annuity model in highway construction. By the time one type of model is understood by participants, yet another model is introduced. Therefore, what we have now is a mishmash of provisions. As a result, a person who has done a project under the BOT toll model ends up applying its provisions to EPC contract!
Policy wise, I don´t think there is much scope for improvement because the government is taking all the initiatives to streamline the processes. The only improvement required is at the execution level. And there we are badly lacking. There is an acute shortage of trained manpower in construction and design conceptualisation. Majority of our engineering graduates passing out of premier institutions are not adopting civil engineering as a profession. They prefer to work in consultancies, management, information technology, etc. For instance, I rarely come across anyone from the Indian Institutes of Technology (IITs) in the construction industry. It is difficult to find even students from National Institutes of Technology (NITs) in the industry.
Provide us with your perspective on award of projects, land acquisition and project execution...
The government is fixing targets and proceeding with them. Award of projects is on the right track. There have been some instances where award of projects has gotten into administrative, technical and other complications, but on the whole it´s satisfactory. As a firm, we mostly deal with the Ministry of Road Transport and Highways and its nodal body, the NHAI. Even at the level of state governments, we have only faced minimal issues. Things are further improving with the induction of technology and other things. The process has become a lot more transparent, with the government having done a lot in that regard.
However, land acquisition is still a big hurdle. The issue of land acquisition must be resolved before a project is awarded. In most of the cases, this is not happening. You don´t find any urgency at the level of implementing authorities to ensure that land acquisition should be thorough and construction stretches free of all encumbrances. A contractor is fortunate if he gets the entire project length cleared at the time of award of a project.
As I stated earlier, we are very badly placed in terms of project execution.
What are the issues affecting the viability of various projects in the roads & highways sector?
It is the lack of good project preparation. If preparation is done in the right manner, you will know at the very outset itself if the project is going to be viable or not. If proper homework is done right at the time of project preparation itself, there is no way that a project cannot be completed on time. The government authorities as well as consultants, they both have to work together towards this goal. Whenever there is a problem in project viability, you will find that there is something wrong in the project DPR. This mostly accrues from incorrect estimates, erroneous field surveys or ignoring key project parameters. On the other hand, a sound project preparation proactively ensures completion of at least 90 per cent of a project well in advance. All that remains to be done thereafter is marshalling of resources and commencement of construction. The way the government is now approving contractors for projects is more or less a foolproof method to cancel out under-qualified contractors or concessionaires. This leaves only eligible companies with necessary resources, finances and manpower in the fray. However, what is happening at the moment is that we have to take care of so many things besides construction.
My primary expertise is construction. But I don´t know about land acquisition, managing environmental clearances and so on. Yet I am made to work on those areas too, though they aren´t my cup of tea.
What are the constraints faced by a developer vis-a-vis financing of road & highway projects?
So far we haven´t faced any financing problems. GR Infra is a zero-debt company. Therefore, I don´t know how or where these problems lie where some other construction firms are concerned. My guess is that either those companies have created huge debts for themselves, or they might have indulged in practices that result in their ratings getting downgraded. We have always managed to secure finances for projects awarded to us. We have done only one BOT toll project and met all parameters considered at the time of bidding.
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- MANISH PANT