More premium bids for NHAI

All 4 bids opened on negative VGF exceeding estimation by far.

NHAI opened four National Highway bids (on BOT) over the past two working days–three on Friday, 18 November and one on Monday, 21 November. The four have all been on premium, also called negative Viability Gap Funding (VGF) of varying amounts. When NHAI bids out, there is an “expected premium” or “estimated VGF”. In one of the bids, the premium exceeded expectations by far.

The four bids were:

• Hospet-Chitradurga (219 km) in Karnataka's iron mining belt: estimated VGF 22 per cent. Ramky has bid at Rs 63 crore premium.
• Raipur-Bilaspur (125 km) in Chhattisgarh, another mineral-rich belt: estimated VGF 18 per cent. IVRCL has bid at Rs 45 crore premium.
• Cuttack-Angul (153 km, Rs 1,340 crore) in Orissa, along a trunk North-South route in a mineral-rich region: estimated VGF 7 per cent. Ashoka Buildcon has bid at Rs 61 crore premium.
• Maharashtra-Karnataka border to Sangareddi in Andhra Pradesh (145 km, Rs 1,266 crore): estimated VGF 36 per cent. L&T has bid at Rs 81 crore premium.

This list is significant because 2011 has seen a large number of premium bids on roads, which some experts attribute to the buoyant enthusiasm among private participants in the highways sector, while some others believe growing desperation among competitors to bag projects is the reason. While nearly 4,000 km of roads have been bid out this year, JN Singh, Member (Finance), National Highways Authority of India (NHAI), told Infrastructure Today about 3,000 km more will be bid out this fiscal on BOT. If that materialises, the 20 km-a-day target set by the road transport ministry will be met. Non-BOT projects will dominate next year's bids, he said, since much of the Phase IV of the National Highways Development Programme (NHDP) aims to develop less viable stretches.

All 4 bids opened on negative VGF exceeding estimation by far. NHAI opened four National Highway bids (on BOT) over the past two working days–three on Friday, 18 November and one on Monday, 21 November. The four have all been on premium, also called negative Viability Gap Funding (VGF) of varying amounts.