Recent Developments: Noteworthy events in the road sector

Noteworthy events in the road sector

The road sector has shown significant progress during the past year. The government launched a number of crucial projects to remove pre-construction bottlenecks, facilitate digital transformation, increase transparency and expedite processes. The year also saw a few landmark deals being signed to address financing concerns.

Indian Infrastructure tracks the major developments in the past year…

  •  The Central Road Fund, which is a major source of budgetary support for the road sector, was amended by the Finance Act, 2018, and replaced by the Central Road and Infrastructure Fund, under which funds are to be earmarked for various infrastructure sectors such as transport, energy, water and sanitation, communication, and social and commercial infrastructure.
  •  A crucial development in the sector was the financial closure of the first bundle of toll-operate-transfer (TOT) projects. An upfront payment of Rs 96.81 billion was made by the Macquarie Group to the Ministry of Road Transport and Highways (MoRTH) based on the concession agreement signed on April 26, 2018. As per the agreement, the right to collect toll on the nine selected national highway stretches spanning 680.64 km has been assigned to the Macquarie Group for a period of 30 years against an upfront payment to the government. Meanwhile, the National Highways Authority of India (NHAI) cancelled the second TOT bundle on the back of lukewarm demand. Instead, the authority has put the third bundle on the block, with the last date of bid submission being September 11, 2019. The third bundle comprises nine stretches spanning 566.27 km across four states – Uttar Pradesh, Jharkhand, Bihar and Tamil Nadu.
  • In a bid to tap innovative financial models for the Bharatmala programme, NHAI recently signed an MoU with the National Investment and Infrastructure Fund (NIIF). The MoU is for cooperation in the formation of special purpose vehicles to execute the fund arrangement for large-size road projects, particularly greenfield projects, to be executed by NHAI in the future. Separately, the NIIF and infrastructure investment company Roadis have announced the creation of a platform for investing in road projects in India. The platform will invest up to $2 billion of equity to target projects being bid out through the TOT model and to acquire existing road concessions.
  • In a major financing feat, NHAI signed an MoU with the State Bank of India (SBI) for an unsecured loan worth Rs 250 billion in August 2018. The loan will be provided for a period of 10 years with a three-year moratorium on repayments. It is the largest loan amount to have been sanctioned to NHAI by any institution at one go. The loan sanctioned by SBI is unsecured, which implies that there is no principal repayment liability for the initial three years. After this period, the repayment will be done in 14 equal half-yearly instalments.
  • Major developments in the road sector during the period 2014-15 to 2018-19 were the construction of the Eastern and Western Peripheral Expressways, the Delhi-Meerut Expressway, the Dhola-Sadiya Bridge, and a 1.21 km bridge over the Ravi river in Kathua district in Jammu & Kashmir. The Eastern and Western Peripheral Expressways have been constructed with the objective to decongest the national capital by providing an alternative route to traffic not destined for Delhi.
  • Meanwhile, the Cabinet Committee on Economic Affairs (CCEA) has approved the construction of a four-lane bridge including approaches over the Brahmaputra river between Dhubri on the North Bank and Phulbari on the South Bank on National Highway (NH)-127B in Assam/Meghalaya. The total length of the bridge will be 19.28 km. In addition, the CCEA also approved the construction of a 5.63 km four-lane bridge across the Ganga river in Patna, along with approaches on NH-19, at a capital cost of Rs 29.26 billion.
  • A key project of the utmost strategic importance, the Zojila tunnel, Asia’s longest bidirectional tunnel in Jammu & Kashmir, has faced cost escalations from Rs 68 billion to Rs 84 billion. The government has scrapped the tender for the construction of the tunnel citing administrative reasons. The government will float a fresh tender in three months after securing cabinet approval. The cost of the project has been revised upwards by Rs 16 billion after termination of the contract with IL&FS Transportation Network Limited, the road development arm of the crisis-hit Infrastructure Leasing and Financial Services.
  •  In order to expand the FASTag programme’s distribution network, an MoU for the sale of FASTags through petrol pumps of leading oil marketing companies (OMCs) was signed in January 2019. The MoU was signed between Indian Highways Management Company Limited and OMCs including Bharat Petroleum Corporation Limited, Hindustan Petroleum Corporation Limited and Indian Oil Corporation Limited. Meanwhile, two FASTag mobile apps were launched in the same month. The My FASTag Customer App is able to recharge any FASTag in real time through the Unified Payments Interface. The FASTag Point of Sales App allows the creation and management of distribution partners and allows sales via petrol pumps as well. More recently, FASTags have also been made available on e-commerce platform Amazon.
  • In a notable development, the Motor Vehicles (Amendment) Bill, 2019, was passed in end July 2019. Aimed at increasing safety, the law has proposed stiffer penalties for traffic rule violations such as overspeeding, dangerous driving, driving under the influence of alcohol and other offences such as not wearing a helmet or driving without a licence. The penalty for drunk driving has been increased by five times to Rs 2,000. Speeding will now attract a fine of Rs 5,000 instead of Rs 500 earlier. Not giving way to emergency vehicles such as ambulances will attract a fine of Rs 10,000. The new law also allows the centre to ask manufacturers to recall vehicles in case of defects that cause harm to the environment.
  • A number of MoUs have been signed to enhance technical cooperation – an MoU with Transport for London to revamp the country’s public transport architecture; an MoU with the Ministry of Transport of the Russian Federation for bilateral cooperation in the road sector; and an MoU with the Korea Expressway Corporation to facilitate technical and institutional knowledge exchange in the field of transport.
  • The MoRTH has inventorised 172,517 bridges/structures under the Indian Bridge Management System (IBMS). These structures comprise 134,229 culverts, 32,806 minor bridges, 3,647 major bridges and 1,835 extra-long bridges. Earlier, no proper data was available on these structures on the national highway network. The IBMS has been established to present the data on the number of bridges and other structures on national highways in a digital form.
  • Reportedly, the State Highway Authority of Kerala (SHAK) will be set up under the public works department (PWD) to facilitate road infrastructure development, adopt new technologies and develop 40 billion climate-resilient road networks across the state. The Roads and Bridges Development Corporation of Kerala, the Kerala State Construction Corporation and the Road Infrastructure Company Kerala, functioning under the PWD, will be merged to set up SHAK.
  • Constant efforts to expand and upgrade the network of national highways in the country has resulted in road construction growing at 30 km per day in 2018-19 vis-à-vis 12 km per day in 2014-15. The MoRTH had set the target of 10,000 km for construction of national highways against which 10,855 km – more than 100 per cent – has been achieved during 2018-19. Upbeat about the overachievement, the government has raised the target for 2019-20 to 12,000 km of highway construction. With the government scaling up the targets each year, continuous reform measures will be required to support these targets.