Highway Development : Targets revised for PPP and EPC projects

At a meeting held between the Prime Minister’s Office (PMO) and the Road Ministry officials, it was decided to award 1,000 km of road construction work target on Engineering, Procurement and Construction (EPC) basis. This is as opposed to the Public-Private Partnerhip (PPP) mode on which the targeted work was earlier planned.

Drastic revision in PPP project targets:

The Roads ministry has drastically reduced its target for awarding road and highway construction work both on PPP and EPC modes. The target proposed by the government at the beginning of the financial year 2012-13 was to award contracts for 3,200 km of work on PPP mode. This had to be scaled down considering the changed market scenario. As per the revised target set, only 700 km of road contract has been awarded hitherto.

EPC project targets too curtailed considerably:

There has also been a revision in the targets set for EPC projects, with the original target of 6,950 km being curtailed to 5,000 km. As disclosed by an official in the ministry, it has planned to award atleast another 1,000 km of work under the EPC mode. This will be awarded from the 2,000 km of work that was earlier planned in the PPP mode. The targets were revised about two months back after discussions that NHAI officials had with the PMO and Planning Commission. The reason for the revision was because no private players were coming forward to bid under the PPP mode.

Bidders shy away from Expressway projects:

Due to this changed scenario, the government has been able to award only 22% of the  planned target that was proposed under the PPP mode for this financial year. Meanwhile, apprehensions were raised regarding availability of bidders for three expressway projects that were planned by the ministry and NHAI on PPP mode.  These include the Mumbai-Vadodara Expressway, the Delhi-Meerut Expressway and the Eastern Peripheral Expressway. The situation was not too different last financial year either. In 2012-13, the NHAI was able to award only 1,116 km of road projects as opposed to the 9,500 km that it had planned to award. This was only 11% of its original target.

Industry expected to wade through challenges:

The fact that the industry was going through a bad patch with regards to private investment in infrastructure projects was evident from the number of projects awarded under the PPP mode that were left in the limbo. Since 2010, as many as 39 highway projects were awarded to private concessionaires. Of these, 23 projects are yet to get off the blocks owing to cash crunch faced by the concessionaires. Lack of equity in the market and the unwillingness of lenders to lend for new projects were also constraining factors. However, the secretary of the Department of Economic Affairs was optimistic that there would be a revival in private investments in the near future, considering that the economy had started to look up.