Strap: Empowering States for Fast Tracking
Clearances and Approvals locallyStrap: Focused approach towards EPC Mode for
awarding contracts substituting PPP
A Journey of a Thousand Miles Begins
with a Single Step. Roads infrastructure is at murky stage with the current
backlogs and Logjams of Projects. The newly formed government has tough Roads
ahead to put in place correct policies and reforms to overcome the situation. Road
sector is crucial for the growth of the economy. Realising this development of
Roads Transportation Tops the Priority list of the newly form government.
Moreover, as per Business leader it was lack of political will which didn’t
allow policies to take off in recent past.
The Indian road sector continued to
face multiple challenges in this financial year in the form of high interest
rates, sluggishness in award of road contracts, reduced availability of funds,
execution slowdown, and increased competitive intensity. However, execution on
many of the projects awarded over the last one year remained slow primarily
because of delays in land acquisition, clearances, and financial closure.
Rough Roads
- 260 projects involving about 60,000 Crore rupees implemented on PPP model are currently delayed due to various reasons
- From 2004 to 2014, the road making activity has declined from an average of about 20 km a day to 3 km per day
- 189 projects worth INR 1,80,000 Crore are stuck because of difficulties in land acquisition and clearances
- Road building cost has increased from INR 5 crore a kilometre in 2004 to INR 13 crore a kilometre in 2014
- The PPP Model has proved to be absolute failure for the sector
- Since 2009, only 350 odd kilometers have been added to India’s national and state highways
Aspirations are fairly high from the Narendra Modi government who
won clear majority in elections. After few days of becoming Prime Minister, he
said "A nation that gives impetus to infrastructure, be it roads, rail,
airport, that is where chances of development increase. We have to take
ownership to build a strong nation” Business
sentiments are improving and corrective actions are being taken to kick off the
sector from the prolonged sluggishness.
PPP model of awarding road projects has proved to be complete
failure in India leading to dipping down of road construction to merely 3 km
per day. Challenges are many- Overall
economic downturn, Lack of equity in the market, Difficulty in arranging debt, Highly
leveraged balance sheets for highway developers, Land acquisition &
approval and clearance related issues. Blaming the UPA regime for the present
situation, the Roads Minister said the previous government awarded projects with
ought even acquiring 10 percent of land which resulted in delays and cost
overruns. As a major policy shift, it is decided to implement projects on EPC
model.
At present, there are 437 projects entailing an investment of
around INR 21 Lakh Crore is delayed due to various issues across infrastructure
sector. Around 260 Road Projects worth INR 60,000 crore are stuck owing to
different issues like clearances and approvals. All efforts are being made to
unite Roads and Railway ministries for faster implementation of projects. Also
in an important decision, the process of clearance for Roads bridges has now
been simplified with online application and NHAI would bear the construction
and maintenance cost of the projects. Few of the decisions are:
MoEF to allow state governments to
give permission for sand mining up to 20 hectares as against the existing norm
of 5 hectares
State government and regional
office MoEF will be allowed to clear linear projects involving forest land up to
40 hectares
National Board of Wild Life
approves number of projects falling within 5-10 kms radius of various sanctuaries
Railways to do standardize
ROB & RUB designs & to put the mechanism online
To take up the stalled and non commercial viable
projects, the NHAI board has given in principle approval for creation of a body
i.e. Asset Reconstruction Company which would try to make projects
feasible. Indian Banker’s Association has already given their consent as most
of the Roads assets are turning NPA’s. The
entity would have two options: - firstly, it could take over the entire project
according to the clause of the concession agreement. Secondly, it can take
small portion of the delayed work and then complete it. It is a welcome move as
it would help in improving the situation of cash starved sector.
There is huge number of ongoing disputes, involving arbitration
cases amounting to INR 26,556 crore investments between developers and NHAI. To
resolve this NHAI has by now settled INR 10,550 Crore projects with
concessionaires. As of now 49 pending claims involving 26 contractors has been
cleared (See the Graph).
Source: Infraline Research
For
ending corruption the Amendment in Motor Vehicle Act is proposed in next
session of parliament. Few of the changes would be based out of the best
practices of the world like E-Governance. The RTOs would be linked to
e-governance to bring total transparency in the system as they are lots of
malpractices prevailing which needs to correct.
The
government would have to work on the policy framework to assure at least 16
percent Internal Rate of Return for infrastructure projects. This would
safeguard the developers from Foreign Exchange fluctuations and boost investment
in the sector.
India has to soon embark on next wave of economic growth
which will encompass some fundamental shifts in growth model as well as larger
and bigger social reach to benefit its vast population. Being one of the
fastest growing economies of the world requires physical infrastructure
facilities to continue the pace of development process. With the advent of the
new Government, firstly, it has to build and expand its key infrastructure to
global standards and Road sector has to play major role in this advancement.
By
InfralineEnergy Roads Knowledgebase Team
Disclaimer
The views expressed here are solely those of the author in his private
capacity and do not in any way represent the views of the Infraline
Technologies (India) Pvt. Ltd. (organization). The organization is not liable
for any use that may be made of the information contained therein and any
direct/indirect consequences resulting therefrom.
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