Vijay Chhibber, Secretary, Ministry of Road Transport & Highways and Ministry of Shipping, appears bullish as he offers a status check of roads and highways projects.
What are the policy initiatives taken to kickstart stalled projects?
The major policy initiatives of MoRTH in recent past are as follows:
Exit Policy: The cabinet recently allowed private developers to exit all operational BOT projects two years from start of operations.
Revival of languishing projects: The cabinet recently allowed revival of BOT projects lan¡guishing in construction stage through one-time fund infusion by NHAI, subject to adequate due diligence of such projects on case-to-case basis through an institutional mechanism.
Promoting innovative project implemen¡tation models: Recently, a hybrid annuity model was adopted by MoRTH wherein the private sector continues to take the construction and O&M risks as in BOT projects, but is not required to bear the traffic risk (40 per cent capital grant by Government during construction period and balance as annuity payments). 20 projects are being rolled out.
Monetisation of highway projects: is being taken up by MoRTH on a priority. Under this, the right of collection of user fee (toll) in respect of the selected highway stretches constructed through public funding shall be assigned for a specific period to developers or investors against upfront payment of a lump-sum amount. Detailed stakeholder consultation session was done by MoRTH in July to finalise the implementation framework. Draft Model Concession Agreement (MCA) is ready.
Mode of delivery of projects: MoRTH has been empowered through a cabinet decision to decide on the mode of delivery of projects, PPP or EPC.
Increased threshold for project approval: MoRTH has been authorised to appraise projects up to Rs 1,000 crore, both for PPP and EPC mode in place of the earlier Rs 500 crore.
Enhanced inter-ministerial coordination: An infrastructure group has been created under Hon´ble Minister RTH & Shipping for addressing inter-ministerial clearance and related issues. Most of the issues pertaining to MoEF, Railways and Defence have been sorted out.
Fast track dispute resolution: A three stage dispute resolution mechanism has been made operational at NHAI in order to expedite dispute settlements. Dispute related claims worth Rs 1,7524 crore have been settled for Rs 1,404 crore in 84 projects. Further, a Society for Affordable Resolution of Disputes (SAROD) has been created by NHAI along with NHBF for affordable, timely resolution of disputes.
Amendments to MCA: Certain changes have been approved by an empowered Committee of Secretaries (CoS) headed by the Cabinet Secretary in a meeting held in August, 2015.
Project packaging: Projects are being split into manageable packages, prioritised and implemented in a phased manner to ease out fund requirements.
As a result of these initiatives, the highway sector is showing signs of revival. For example, in 2014-15, five toll projects with an aggregate length of 734 km and estimated cost of Rs 6,300 crore could be awarded. Further, in 2015-16, one toll project has been awarded. Bids have been received and are under process for at least seven projects. The aggregate length of these projects is around 1,000 km and estimated cost is Rs 13,400 crore. Bids are also likely to be received for more projects. This trend is expected to continue and gain momentum in the coming months.
The government has plans of awarding projects worth Rs 3.5 lakh crore in the next six months. How many projects will be BOT, Hybrid Annuity and EPC?
The government plans to award over 10,000 km of NH for development or upgra¡dation in FY 2015-16 at an estimated cost of approximately Rs 1,50,000 crore. Unlike in the past when toll was the default mode, the mode of delivery of project is now being determined on the basis of traffic and civil cost of construction. We envisage a healthy mix of toll per 1,500 km, BOT (Annuity)/500 km, Hybrid Annuity (1,500 km) and EPC 6,500 km during the year.
What are you doing about the squeeze in lending?
Steps have already been taken by MoRTH by enabling policy measures through sustained coordination and follow up with the Ministry of Finance, RBI, etc. Extensive use of long terms funds (pension, insurance, and others) through infrastructure debt funds (IDFs) are being encouraged through the Finance Ministry.
In January 2015, MoF published the revised investment pattern applicable for non-govern¡ment provident funds, superannuation funds (pension funds) and gratuity. The same is effective from April 2015 and contains encou¡raging provisions for attracting pension funds for highways.
RBI Circular, March 18, 2013, considered lending to highways to the extent assured by the authority as secured. RBI Circular dated July 15, 2014 and December 14, 2014 encou¡raged banks for flexible structuring of long tenure project loans by allowing long-term debt funding matching the concession period through refinancing provision (5/25 structure).
What is the status of Bharat Mala? How will you raise the funds for this project?
Under this, roads along international borders and coastal areas will be developed (7,000 km). Projects are under identification. Funding options are under examination.
For the hybrid annuity model, how will you raise the funds for these projects?
Under the hybrid annuity model, initially 20 projects have been identified to be implemented with an aggregate length of around 1,387 km and estimated project cost of Rs 24,328 crore. Out of these, three packages of the Delhi-Meerut Expressway, Meerut Bulandshahr NH 235 and Varanasi Sultanpur- NH 56 are already in the bidding stage.
The government is exploring a slew of measures, including bidding out projects to original proponents under ´ Swiss Challenge System´. How will this model help to clear the backlog of the road projects?
The ´Swiss Challenge´ Method as a mode of procurement of project developer is under examination by MoRTH. The method if adopted, would only be applicable for certain typical projects like expressways and NHDP VII projects and not to run-of-the-mill regular highway projects.
The government has been exploring various financial models in order to revive the private investments in the sector. According to you, which is the most feasible and sustainable model in the sector?
It appears the hybrid annuity model should be a fairly sustainable model, with the private sector required to bring in reduced funds during construction stage and being insulated from traffic and escalation risks in the operations stage.
Is it true that the government is tapping international multilateral agencies as well as private players to fund road projects? Which international players have evinced interest in the Indian road projects? How much investments have they committed? What is the status of this?
Interactions with multi-lateral funding agencies like World Bank, ADB, JICA, CIDB Malaysia and others are on. Details are yet to be finalised.
The government has set the target of building 30 km of road every day. Can you please take us through your plans to achieve this target? Please tell us about the current speed of road construction per day.
Steps are being taken by the ministry and NHAI to expedite award of projects. A realistic target of 6,300 km of NH construction and 10,000 km of NH to be awarded has been set for 2015-16. Emphasis is also being laid on qualitative upgradation of existing national highways in terms of safety standards, riding quality, and roadside amenities. The award of NHs in the next fiscal will be in excess of 30 km/day.
The road ministry has decided to build concrete cement road in place of traditional bitumen roads. Tell us about the government´s strategy to procure cement at cheaper rates?
MoRTH is encouraging use of rigid pavements where feasible in new projects. An IT framework has been launched to facilitate the contractors to source cement directly from the manufacturing units at reasonable prices.
Private players´ poor response in the road sector
- Over-leveraged financials for the limited number of highway developers in the country due to excessive exposure to infrastructure projects
- Lack of availability of debt products aligned with a revenue stream profile of highway projects resulting in a financially stressed projects
- Some banks reaching the ceiling as per sectoral exposure norms
- Aggressive bidding based on unrealistic traffic projections in the past
- Projects getting stalled in the construc¡tion stage due to issues pertaining to land acquisition and other regulatory clearances
Status of the 73 stalled projects in the road sector
Projects with issues sorted out :19
Projects with LoA
withdrawn/CA terminated:39
Projects with issues being
sorted out :15
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