The bidding process is good for small, medium and large players

Banks’ new stipulation of 100 per cent land availability for highway projects, along with poor response from bidders and financial closure difficulties among concessionaires, have hampered the awards and implementation, says JN Singh, Member—Finance, NHAI, in an interview with Sumantra Das.

It seems that National Highways Authority of India (NHAI) award activity remained sluggish during first half of FY 2013. What are the reasons?
Major reason behind this is the poor responses from the concessionaires and in some of our bids (about 7-8) we havenÂ’t even find any bidder. Secondly, banks also are asking our 100 per cent land availability for making financial closure, which is putting the concessionaire in a bit tighter spot. That is why government has decided that 4,000 km will be awarded through engineering, procurement and construction (EPC). We expect 4,000 km will be given through EPC contracts and the additional 3,000 km will be bid in the next four months.

What is hampering the speed of highway projects?
In macroeconomic conditions, if manufacturing growth is low then the freight traffic will be much lower. Soluble traffic is lower on highways. That way financial viability of the project becomes lower than what we have anticipated.

Can NHAI achieve its target?
We always give a hypothetical target. We are giving ourselves a target as to what we would like to achieve. But since the situation is not at all good, we will have to see what best we can do.

Do you think that the approved new EPC model can attract midsized regional players in the road sector?
Considering all factors, there is no doubt that it will attract all bidders in the country.

Will smaller playerÂ’s entry in the sector bring changes?
Right now bidding process is good for small, medium and big players. Now it is very difficult to say who will come to bid and who will not be able to bid. But it will be considering that financial threshold is low you can expect regional players to come gradually.

How many projects does NHAI plan to award through EPC?
A bit difficult to say, but tentatively we can say almost 4,000 km length will be done through EPC in over next 3-4 months.

In the present scenario, will large players opt for EPC model or BOT model?
Large players would like to, and more than the developers, it will be the direct contractors who will be interested in direct EPC players. Bigger players may not find it that useful, the overheads and all may not be able to compete.

Can you tell us how many NHAI projects got delayed and what are the reasons behind it?
About 23 projects are delayed more than normal period due to financial closure issues. We also have issue of forest and environment compliance and in some cases there are land issues also.

If these issues sustain, do you think NHAI will be able to achieve its target anymore?
In that case, we will have a lower goal. If environ­ment clearance and other issues do not come in place then it means that we are happy with normal type of roads only.