With road development a top priority, the focus is squarely on the National Highways Authority of India (NHAI). Its Chairman Raghav Chandra talks to Rouhan Sharma about the road ahead.
What are the changes effected to improve dispute resolution?
There has been a significant mindset change in the approach of NHAI and its officers. This is the most significant improvement in the working situation that we have ushered in. There are several projects which were stuck, which we are trying to resolve by working closely with the banks and the concessionaires. There are several schematic solutions which have been brought out, some of which require further tweaking. We are in the process of tweaking them and bringing this to the knowledge of the government to tweak them appropriately. We are hopeful that there will be significant traction and improvement in the legacy issues that I am confronted with today.
Are there any steps you can mention that have been introduced with respect to the procedural aspects for dispute resolution?
We have taken a decision that wherever we can avoid litigation and resolve an issue amicably, it must be done. We are making use of the provisions within the concession agreement which permit amicable resolution at the level of the chairmen of the two parties, i.e., the private sector and the government, to resolve issues. Often, it was almost a forgone decision that every time an arbitration tribunal would pass an order that we would necessarily contest it before the High Court. Now, we are more discerning and we do not do that as a matter of routine. Instead, such issues are brought to the executive committee comprising the chairmen and the members. We deliberate on each case on its merits, on the decision the arbitration tribunal has passed, and wherever possible - if it broadly fits into the larger ambit of being reasonable and which is not a significant departure from what NHAI had envisioned - then we try to accept it.
There was a committee headed by general managers which used to decide whether cases had to be appealed against after an arbitration award. We have disbanded that committee. We have introduced another layer of conciliation. We have a committee called the independent settlement advisory committee (ISAC) which is headed by a retired High Court judge, which has a former Director General, Roads and a former secretary, Government of India. This committee was mandated to resolve issues. For this, they used to seek inputs from a committee of three chief general managers (CGM) which used to examine each dispute case and give their recommendations to this committee.
It was often found that where the claims by a concessionaire were not accepted by the three CGMs and the concessionaire was not able to accept the recommendations of the committee, the matter would lapse and invariably go into arbitration. We have now said that even where the recommendations of the CGM committee are not agreeable to the concessionaire or contractor, he can still go before the ISAC, present his case and they can arrive at a summary decision, without forgoing his ability to go into arbitration so that arbitration still remains a right. However, he has another level of conciliation. We are hopeful that this will help to bring about more smoothness in our entire interface with contractors and concessionaires as far as dispute resolution is concerned. This is beginning to happen already. This is an experimental sort of arrangement, which could yield fruit, in which case we can encourage more and more concessionaires and perhaps they will also be encouraged to choose this path.
This year, can we expect to see many stalled projects being cleared and money being freed up to invest in new projects?
Already, there are lots of schemes of the government like equity infusion for allowing simpler exit and extension of the concession time. Some of these schemes were there earlier but they require tweaking; for instance, for the scheme for equity infusion into languishing projects, I am writing to the government to amend those provisions where they have stipulated that the first charge must necessarily vest with the NHAI. We have said this is not workable vis-a-vis the banks and so a pari passu sharing of receivables is a more practicable solution. It might require the Reserve Bank of India (RBI) to be more forbearing when it comes to the extension of the time for the loan. We are hopeful that, though it may be delayed - since the intention of the government is to support completion of incomplete projects - which, as a thought and in spirit, comes through very clearly, we should be able to fortify our efforts with the government´s supporting hand.
What are your project award targets?
We expect to do about 5,000 km of awards every year and we are hopeful that over the next three years, we should have a clear portfolio of projects to award. We ought to do about 15,000 km, which would translate into Rs.200,000 crore worth of projects. There are large components which will be done by NHAI.
We will look to do a lot of expressways and inter-connectivity projects in and around major cities.
Are you interested in awarding projects in North-east India?
We have some projects going on in the North-east, though that is not the key area that we are looking at.
What are your expenditure targets?
We have spent overall, in terms of actual spending, more than last year already. By March, we would end up spending about Rs.50,000-Rs.55,000 crore. The target for 2016-17 would be something similar to 2015-16.
What is your take on the Hybrid Annuity model? Some developers don´t seem happy...
We have already begun to award projects under the hybrid annuity scheme and I think it is workable. We had a discussion with the banks and the bankers in the Indian Banks Association (IBA) forum in Mumbai and there did not seem to be any serious difficulties in the banks lending for these projects.
Do you see scope for improvement in the model?
We are open to tweaking and changing things based on the response of the industry. Unlike the past, the significant mindset change is that we are open to suggestions and re-looking things to make them work. The bottom line is that roads should get done. These are not just routine contracts and it´s not that the government is starved of funds. The essence is that we want private sector efficiencies and private sector skills to come in with their innovations and their competencies. On our part, we will undertake to do everything possible to ensure that the private sector is encouraged and motivated to come forward.
Today, EPC projects are preferred over BOT projects. How do you expect this to pan out?
The real interest of private parties in BOT is going to get revived after these legacy issues get resolved. Therefore, it is important to resolve these issues and the languishing projects because that has really caused a lot of prominent private parties who were interested in BOT to burn their fingers. This was due to a wrong assessment of the financial parameters, opportunities and challenges connected to the projects. I think, in the days to come, there will be a healthy balance between EPC and PPP.
On the cost side, how are you placed?
We have adequate funds because we get cess funds, we collect tolls and we have raised bonds. On infrastructure, the current government is not flinching at all and is extremely supportive.
How big a challenge is land acquisition?
Land acquisition costs have gone up almost two-three times because of the new Land Acquisition Act, which leaves very little discretion for the competent authority. Most of them choose now to award compensation at the highest end of the spectrum and the level of litigation also has gone up considerably because people raise many more issues just to secure a higher compensation or stall the proceedings until they get the highest level of compensation. That is a deterrent.
Otherwise, we are preparing for the future in terms of land acquisition for our road projects for the next one or two years. Acquisition is certainly taking much more, about two and a half times our earlier costs. It is about Rs.1.75 crore to Rs.2 crore per hectare now as per the new Act and the system is that a state government official is appointed as the competent authority to award. He follows the principles that have been enshrined in the Act and what is being followed in his state to make awards. By and large, we accept the awards unless they are significantly absurd. That also happens sometimes. Once, for a road site in a village, the competent authority awarded commercial rates and his explanation for that was that this would, in the future, be used for commercial development. We had to approach the state government to get it rescinded. Unless there are exceptional cases, by and large, we accept the judgment of the competent authority.
Tolling is still a pain point for both the collector and the user. Are there any initiatives to move towards barrier-free tolling?
We are working towards electronic tolling. In a period of about two years, we should have barrier free tolling all over the country. That may not be entirely, but you will have gantry-based tolling. In India, you don´t have that many people having credit cards or people who would subscribe to our FIBs because they still would have traditional means of paying by cash, especially truckers and so on. However, we hope that in two years time, we should be able to install gantry-based tolling systems.
Distributing cards should not be a problem...
Distributing is not a problem but from the user side, there should be adequate pervasiveness. I still find that users are reluctant and we will launch a mass campaign. We are in the last stages of working out the details with the National Clearance Corporation and setting up a clearing house.
There was an attempt made earlier...
Yes, but that did not succeed. Now, we are revamping the whole thing. My thoughts are that by April of this year, you should see some solid traction.
It´ll be like how it is in more developed countries?
Yes, but slowly, to begin with. It´ll be RFID sticker-based but the ultimate idea is to graduate to gantry-based where it´s on the gantry and you just need to pass by. You don´t even have to swipe or even go on to a particular lane. You just have to pass by. There are no lanes. The future is a lane-less tolling system. You will have a gantry which covers all the lanes and you just move through. As of now, you have to move through the lanes which have a transponder which assesses your RFID. The ultimate situation is you have an RFID but there´s no lane. You just zip past and the gantry has read it. We are working clearly in that direction and it´s a matter of putting it all together, step by step.