NHAI more comfortable with EPC than PPP
The central government is currently building several road projects across the country on a public private partnership (PPP) model and intends to build few more projects in a similar way. However, the National Highways Authority of India (NHAI) has made a bid to dump the PPP model and go back to the earlier engineering procurement and construction (EPC) model. In the EPC model, the NHAI has control over infrastructure projects.
The NHAI chairman quoted certain reasons in support of taking up the EPC model.
1) Most of the infrastructure projects proposed on the PPP model had not received any good response either under annuity or toll modes in the recent past. One example was the Mumbai Trans-Harbour Link which received no bids even after three attempts. This indicated that there was a lack of equity in the market. According to NHAI data, a total of 1,116 km road projects were awarded for the fiscal year 2012-13 on a PPP model. it had drastically reduced to 122 km till July for the current fiscal year 2013-14.
2) There are certain advantages in the EPC model. In this mode, the government funds the construction and the road developer has to only complete the project in a stipulated time period. It also takes just about 3-4 months to award a project whereas a BoT (Build Operate Transfer) or PPP mode takes longer. The bids are also substantially below the project cost. NHAI felt that current projects started on an EPC mode with an option of operation-maintenance-transfer later if needed, will boost the economy as well as the infrastructure sector while meeting the infrastructure needs.
The EPC mode too had lost luster in recent years. Highway projects of up to 3,055 km were awarded based on the EPC mode in 2005-06, but it drastically reduced to 345 km the next year and just 89 km the following year. During this time projects based on BoT mode had witnessed a rise.
The highway authority recommended certain measures to implement the strategy. Bids for current projects that already have regulatory clearances and are on shelf can be immediately called for, without seeking approvals from the expenditure finance committee. The viability gap funding can be used as a budgetary support for the NHAI. NHAI asked the road secretary to be allowed to explore funding options on the strength of its asset base.
