Roads and Highways Sector in Limbo Phase of Prolonged Sluggishness

The slow-moving performance of the sector and burgeoning issues between Concessionaire and NHAI has raised several questions about the project award process and sustainability of PPP in roads sector. The sector witnessed slowdown in construction activities. Yes I am talking about road development in India. The year 2013 started with the bang for roads sector when GMR one of the largest infrastructure developers terminated the contract for the first mega highway project in the country.  Kishangarh-Udaipur-Ahmedabad stretch was for six-laning of the 555-km on DBFOT pattern. The reason for termination given by concessionaire is delay in getting statutory clearances. Although there are negotiations going on for premium payment but nobody knows when decision would come.

Government of India ambitious target of constructing 20 km of highway per day hit a roadblock as it was able to award only 1100 km of road against the target of 8800 km in 2012-2013. There were many reasons behin d it like delay in Land Acquisition, statutory clearances, necessary approvals, premium payment, financial closure etc. The issue of paucity of roads has been further aggravated by the poor condition and maintenance of the road infrastructure. Even the highways are congested and the lane capacity is low. 

Delay in Road projects

According to a World Bank report, 40 percent of the road projects face 25-50 percent cost overruns owing to various reasons quoted. According to Infraline research few of the BOT highways projects are delayed to 0 to 36 months and beyond for various reasons such as poor performance by some contracts and constraints faced by some contractors, environment and forest clearances (refer to Table below), land acquisition, clearance of railways for ROB designs, shifting of utilities, arbitration matters etc. Here comes the responsibility and obligations of stakeholders of road infrastructure projects.

    



  

Statutory Clearances required for Road Projects
Sr. No.	Clearance Required	Statutory Authority	Time Taken
1.	Environmental Clearance	Ministry of Environment and Forest, GOl, New Delhi	12-15 months
2.	Forest Clearance	Ministry of Environment and Forest	1 -2 years
3.	Clearances for Wildlife areas	National Board of Wildlife and Supreme Court of India	More than 3 years

The Way Forward

According to Economists investment in physical infrastructure is directly related to development of a nation. For a country like us which is still in rising phase, Infrastructure plays imperative role to improve productivity across all sectors. it needs to improve good road connectivity for overall advancement. Roads transport accounts for 85 percent and 65 percent of passenger and freight traffic, respectively, in India. National highways account for a mere 2 percent of the total road length, but carry 40 percent of the total road traffic.

At this economic juncture, private sector has to play active role. Since public expenditure is increasing, the role of private participation needs to expand significantly to address the scarcity of funds in the infrastructure sector. According to Infraline research, the investment in BOT (Toll) mode would be around 68 percent, 8 percent in Annuity and 24 Percent in EPC mode. This trend of investment clearly indicates the level of private participation would be increasing over the period of time.

There is a huge opportunity coming up in the sector with a view to attract foreign direct investment by easing the policies and regulations. This will benefit the infrastructure developers, EPC companies, OMT contractors with the new NHDP projects coming in the sector.

                Infraline Energy Roads Research Team