Basket of Opportunities: Bharatmala opens up new investment avenues

Bharatmala opens up new investment avenues

Lauded as India’s largest highway construction project after the National Highways Development Programme (NHDP), the Bharatmala Pariyojana is a new umbrella programme for the highways sector focused on optimising the efficiency of freight and passenger movement by bridging critical infrastructure gaps. Key areas that have been identified for development are economic corridors, inter-corridors and feeder routes, border and international connectivity roads, coastal and port connectivity roads and greenfield expressways, and national corridor efficiency improvement. The programme has therefore opened up immense opportunities for various stakeholders and envisages a total investment of Rs 10 trillion. While major emphasis will be laid on improving connectivity in the north-eastern region and leveraging synergies with inland waterways, other key areas of focus will be technology and scientific planning for project preparation and asset monitoring.

Ambitious pipeline of projects

Launched in October 2017, Phase I of the programme envisages the construction of 24,800 km of road length and balance road works of an additional 10,000 km under the NHDP, taking the total to 34,800 km and costing an estimated Rs 5.35 trillion. The project is being implemented over a five-year period from 2017-18 to 2021-22, and will aim to connect a total of 550 districts through national highway linkages, while adding 44 new economic corridors to the country’s infrastructure. With this, 70-80 per cent of the country’s freight movement will be along national highways, as against 40 per cent at present, eventually improving the overall logistics performance index (LPI).

With regard to national corridors (Golden-Quadrilateral and North-South-East-West [NSEW] corridors), Bharatmala aims to improve efficiency by decongesting choke points through lane expansion, and the construction of ring roads, bypasses/elevated corridors and logistics parks at identified points. Under Phase I of the project, around 9,000 km national corridors will be taken up at an estimated cost of Rs 1.2 trillion. Further, of the total 26,200 km of economic corridors (carrying heavy traffic) identified for development, 6,000 km will be taken up under Phase I of Bharatmala, at an estimated cost of Rs 800 billion. These corridors have been planned for implementation on an end-to-end basis, thereby ensuring seamless and speedy travel while maintaining uniformity in standards.

Around 5,000 km of inter-corridors and feeder corridors have been identified for development in the first phase of the programme, at an estimated cost of Rs 1 trillion. The criterion used for classifying inter-corridor routes is for the stretches to connect to more than two corridors, while that for feeder corridors is for routes to connect to one or two corridors. The development of these corridors will help address the infrastructure asymmetry that exists at many locations. Besides, Bharatmala also envisages the construction of 4,100 km of border roads that have strategic importance along international boundaries and international connectivity roads to enhance trade with Nepal, Bhutan, Bangladesh and Myanmar. Of these, around 2,000 km of roads will be taken up under Phase I, at an estimated cost of Rs 200 billion.

In addition, around 5,300 km of coastal and port connectivity roads have been identified under Bharatmala, of which 2,000 km are being taken up in the initial phase, at an estimated cost of Rs 250 billion.

Finally, 800 km of the proposed 1,900 km of roads identified for development as greenfield expressways will be taken up under Phase I of the programme, at an estimated cost of Rs 400 billion. Besides, the 10,000 km of balance road work under the NHDP will be implemented at an estimated cost of Rs 1.5 trillion.

Delegation of powers

All the works under Bharatmala have been planned for implementation by the National Highways Authority of India (NHAI), National Highways and Infrastructure Development Corporation Limited, the Ministry of Road Transport and Highways (MoRTH) and state public works departments. Further, there has been effective delegation of responsibility in appraising/approving individual project stretches. For all public-private partnership (PPP)-based projects where no grant or viability gap funding (VGF) is given to the concessionaire and the construction and maintenance is financed by toll revenues, projects will be appraised and approved by NHAI. In the case of PPP projects where a grant or VGF is given to the concessionaire and the construction and maintenance is financed by toll revenues, projects will be appraised and approved as per the guidelines of the Department of Economic Affairs. Meanwhile, PPP projects (annuity/ hybrid annuity model [HAM]) costing up to Rs 20 billion will be appraised by the Standing Finance Committee and approved by the MoRTH, while PPP projects (annuity/HAM) costing over Rs 20 billion will be appraised by the PPP Appraisal Committee and approved by the Cabinet Committee on Economic Affairs.

Financing sources

The MoRTH has chalked out a broad financing plan for the programme. While around Rs 1.4 trillion will be allocated under the Central Road Fund earmarked for national highways, Rs 2.09 trillion will be mobilised from market borrowings, Rs 1.06 trillion from private investments through PPPs, Rs 460 billion from the Permanent Bridge Fee Fund (toll collections of NHAI), and Rs 340 billion from the expected monetisation of assets. Hence, ample opportunity has been created for private sector participation; however, this may prove to be challenging, given the stressed balance sheets of many infrastructure developers. Fast-tracking the land acquisition process and environmental and other clearances will be key in ensuring the successful participation of private players.

The road ahead

The overall outlook of Bharatmala seems positive, with significant progress already achieved with regard to the preparation of detailed project reports (DPRs). Currently, DPRs for 24,800 km are under preparation in phases by various consultants, while DPRs for over 9,000 km have already been completed and made ready for bidding. Besides, all projects under the programme will be technically, financially and economically appraised by an empowered Project Appraisal and Technical Scrutiny Committee that will be set up under NHAI and the MoRTH. This committee will comprise experts from NITI Aayog, a dedicated unit responsible for recommending the appraisal of projects to NHAI’s board or secretary, MoRTH. Further, guidelines have been laid down for the scrutiny of individual projects which are to be followed by all implementing agencies. Also, a “Grand Challenge” mechanism has been planned for adoption to encourage state government participation in the implementation of the programme. Projects that gain support through proactive efforts of the concerned state governments will be taken up on a priority basis.

However, prior to the implementation of the programme, several measures will need to be put in place to ensure its success. Key among these is the incorporation of an independent regulator responsible for redressing disputes in a timely manner before large-scale projects are taken up, given the possibility that arbitration issues could arise. Further, a slew of initiatives including the enhancement of the approval limit of projects by NHAI to Rs 20 billion from Rs 10 billion, increasing compensation rates to farmers under the new land acquisition policy, and digitising land acquisitions will prove to be vital in expediting project implementation under the programme.