JN Singh, Member (Finance), NHAI
Highways have been largely on an upswing. We have awaÂrded-or set to award upon opening bids-4,500 km, and will be awarding a minimum of 3,000 km by the end of this fiscal. The industry has been gung ho about the sector, with premiums in our BOT projects far in excess of our expectations. We recently opened four bids totalling 642 km, and attracting premiums in each case, totalling Rs 250 crore, against our expectation of Viability Gap Funding (VGF) in each case ranging between 7 and 36 per cent.
Next year, too, I see no reason why industry will not respond with equal enthusiasm. Perhaps, there are not too many projects at hand. You would think there is a negative correlation between high rates of interest and interest in projects, but that has not happened.
Although rates of interest are high, I suspect devÂelopers believe these high rates may come down and may not stay up for the tenure of the projects, typically over 25 years. If these rates persist, of course, it would project a massive problem. This means there is strong buoyancy in the sector, notwithÂstanding this year's slowdown.
During the last 3-4 years, the projects are bigger, develoÂpers, with or without partnerÂships, have grown stronger in size and confidence. This has resulted in more competition, reflecting in high bids.
Our proÂjects have been on PPP, but next year, we may have to go for EPC for Phase IV of the NHDP. This phase includes a large semi-urban and rural region, involving single-lane roads: out of 20,000 km in Phase IV, only about 9,000-10,000 km can offer the kind of traffic to sustain BOT (toll) mode, and the remaining will be on EPC. And for this purpose, next year will be an important year for implementation of Phase IV: I expect that bout 3,000-4,000 km will be on EPC since many of them may not be immediately viable.
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