Views of A.K. Singh: “HAM and EPC-based projects mark a surge in competition”

“HAM and EPC-based projects mark a surge in competition”

The road sector has witnessed an uptick in sentiment in the recent past. Leading this change is a host of initiatives launched for the revival of stalled projects as well as the creation of new opportunities for stakeholders across the board. Going forward, the

sector is expected to see heightened activity both at the programme and project levels.  At a recent conference on Road Development in India organised by India Infrastructure, A.K. Singh, member, projects, National Highways Authority of India (NHAI), shared his views on the size and scope of several upcoming opportunities in the sector. Excerpts…

After a period of slowdown, the sector is witnessing increased competition especially in hybrid annuity and engineering, procurement and construction (EPC)-based projects. With regard to the National Highways Development Programme (NHDP), of the total length entrusted to NHAI, only about 11,000 km is yet to be developed.

New models have been launched to revitalise public-private partnerships (PPPs) in the sector and delink risks from projects. The toll-operate-transfer (TOT) model has been recently approved for the immediate monetisation of 75 operational assets for a period of about 30 years. With this, the operation and maintenance segment will see a surge in activity. The hybrid annuity model (HAM) has also picked up pace. So far, 20 projects worth Rs 243 billion have been awarded under HAM.

Key initiatives

There has been greater delegation of powers to the Ministry of Road Transport and Highways (MoRTH) regarding the mode of delivery and appraisal of projects costing up to Rs 10 billion, amendments to the model concession agreement, enhanced inter-ministerial coordination, a new exit policy which has so far benefited seven projects, a one-time fund infusion, faster dispute resolution (with claims worth Rs 175 billion settled in 84 project packages) and the effective revival of languishing projects (63 of 73). Meanwhile, under the scheme entailing the harmonious substitution of the concessionaire, two build-operate-transfer (BOT) (toll) projects worth Rs 26 billion have benefited. Interministerial coordination with regard to the acquisition of defence land, railway approvals and environmental clearances has shown substantial improvement in the past few years.

On the financing front, steps such as extended debt tenor, classification of loans as secured and easing of the refinancing process have proved to be beneficial. Besides, premium deferment for projects worth Rs 146 billion covering 1,351 km has been approved. Also, 10 projects have availed the option of securitisation in the case of BOT projects. The scheme entailing rationalised compensation for concessionaires is under evaluation.

A number of steps are being taken to deal with the issue of land acquisition. New schemes such as land pooling are being explored. NHAI is planning to upload detailed project reports (DPRs) for upcoming projects on its website to enable private players to conduct due diligence before the projects are actually put on the block for bidding, after land acquisition and the requisite clearances are in place.  Moreover, NHAI is planning to get a basket of projects approved by the MoRTH to do away with the waterfall mechanism and bid out projects solely on the basis of financial viability.

Safety aspects of structures developed on national highways are also being considered. Concrete pavements have become the default choice for all projects awarded on an EPC basis. Under-construction highway projects of about 5,000-7,000 km length are being developed using cement.

Business opportunities galore

Overall, investments worth $100 billion are expected to come into the highway sector. About 50 per cent of this is proposed to come from private/external sources. During 2016-17, NHAI targets the award of 15,000 km and the construction of about 8,000 km. About 20,000 km of projects worth $45 billion will come up under the NHDP in the next three years.

Further, there are several big-ticket programmes that are to be rolled out in the road sector over the next two years. Bharat Mala, which is currently at an advanced stage of DPR preparation, will soon see the commencement of the bidding process for a length of 2,000-3,000 km. Some sections under the Setu Bharatam programme are also at advanced stages of bidding. Besides, the district connectivity and Char Dham connectivity programmes will yield substantial opportunity.

The development of expressways will be another focus area of the government. NHAI is in the process of declaring a length of 50,000-55,000 km of roads as national highways. In the future, these will be upgraded to national highway standards and DPR preparation has started for 8,000-10,000 km of roads.

In conclusion, the government has highlighted investment as well as development opportunities across the entire gamut of road sector development. In addition to scaling up activity in ongoing programmes such as the NHDP, new areas of growth are also being explored. However, this requires active support from all industry stakeholders.