Recent Developments: Measures to revive stalled projects

Measures to revive stalled projects

The road sector has seen significant movement in the past year. Project-related activity posted a surge on the back of an array of initiatives on the policy, finance and technol-ogy fronts. Fast tracking work on languishing highway projects remained a focus area. Initiatives such as the rationalisation of the model concession agreement (MCA) and a one-time fund infusion by the National Highways Authority of India (NHAI) are expected to bode well for these projects. Substantial progress was also reported with regard to FASTag deployment, the launch of online platforms and a policy on greening of national highways.

  • In October 2015, the Cabinet Committee on Economic Affairs (CCEA) accorded approval for the extension of a provision for a one-time fund infusion to revive and physically complete languishing national highway projects being implemented on a build-operate-transfer (BOT) annuity basis. The CCEA had earlier approved a one-time fund infusion in BOT (toll)-based projects in June 2015. In July 2016, NHAI and the State Bank of India (SBI) entered into a pact to infuse funds in three national highway projects. As per the deal, NHAI will contribute Rs 11 billion while SBI (along with other lenders) will put in Rs 2 billion for the revival of these stalled projects.
  • In a bid to aid sound execution of BOT projects and address stakeholder concerns, the government introduced amendments to the MCA for BOT projects in September 2015. Changes have been made in the MCA regarding the termination of contract, project milestones, revenue augmentation, toll collection and the rationalisation of timelines.
  • The CCEA also approved the Ministry of Road Transport and Highways’ (MoRTH) proposal to authorise NHAI to extend the concession period and rationalise compensation to concessionaires.
  • In November 2015, the CCEA gave its approval to segregate construction cost from cost for land acquisition, centages and preconstruction activities, for the purpose of appraisal and approval of national highway projects. All national highway projects with a civil construction cost of up to Rs 10 billion are to be appraised by the MoRTH.
  • The past two years have seen an increased focus on new modes of project implementation and revenue generation. In January 2016, the CCEA gave its approval for the hybrid annuity model (HAM) to be considered as one of the modes for implementing projects.
  • In August 2016, the CCEA authorised NHAI to monetise public-funded national highway projects. The projects which are operational and have been generating toll revenues for at least two years after the commercial operation date (COD) through the toll-operate-transfer (TOT) model are eligible for monetisation. Around 75 operational national highway projects completed with public funding have been preliminarily identified for potential monetisation using the TOT model. The move will create opportunities for a new vertical of developers who specialise in O&M of highways and institutional investors (including pension, insurance and sovereign funds) which is averse to taking construction risks but is adequately equipped for making long-term investments in road infrastructure.
  • The central government took several finance-related steps to address investor concerns. These include the move to allow all categories of foreign investment in alternative investment funds and the setting up of the National Investment and Infrastructure Fund. Further, the MoRTH and NHAI are mulling over the option of raising funds through masala bonds. Plans  are under way to list the rupee-denominated green masala bonds on the Singapore or the London Stock Exchange.
  • In the past year, there was a surge in FASTag deployment, which is now operational on more than 335 toll plazas on national highways across the country.
  • Technological initiatives such as the satellite-based road asset management system, an updated version of INAM-PRO with the inclusion of steel and steel slag, and INFRACON, witnessed increased uptake in the sector. The ministry is also in the process of launching the Indian Bridge Management System and has launched a portal for the online approval of movement of over-dimensional and overweight cargo. In January 2016, the ministry signed an MoU with the National Remote Sensing Centre and the North East Centre for Technology Application and Research for the use of spatial technology to monitor projects.
  • At the regional level, the Ministry of Development of North Eastern Region announced the introduction of an exclusive road con-struction initiative known as the North-East Road Sector Development Scheme, focusing primarily on interstate roads.
  • As part of its efforts to promote environment sustainability, the ministry launched the Green Highways (Plantation, Transplantation, Beautification and Maintenance) Policy, 2015 in September 2015.
  • In January 2016, the ministry completed the preparation of a cabinet note seeking approval for the Bharatmala programme aimed at the development of 1,000 km of roads along border and coastal areas. In March 2016, the government launched the Setu Bharatam programme under which 208 railway overbridges and underbidges will be built at level crossings. In addition, the MoRTH aims to overhaul 1,500 bridges at an estimated cost of Rs 300 billion.