The road sector has witnessed significant progress in the past few years. The launch of the BharatmalaPariyojana has further heightened activity in the sector, both in terms of award as well as execution of projects. Besides, the government is continuously working towards addressing the bottlenecks plaguing the sector. The National Highways Authority of India (NHAI) has set ambitious targets for the next few years, offering a plethora of opportunities to all stakeholders. At a recent India Infrastructure conference on “Road Development in India”, R.K. Pandey shared his views on the progress and targets under Bharatmala, upcoming opportunities, and initiatives taken by the government to help contractors and developers tide over the Covid-19 pandemic. Excerpts…
The BharatmalaPariyojana is an ambitious programme launched by the central government to upgrade the country’s national highway network, which carries more than 40 per cent of the total road traffic. The programme covers the development of a total of 65,000 km of national highways. Of this, about 28,000 km has been identified to be awarded during Phase I of the programme, which also involves the completion of balance works under the National Highways Development Programme (NHDP). Of the total length to be awarded under Phase I, NHAI has already awarded projects spanning about 11,500 km, while 16,500 km is yet to be awarded. Meanwhile, NHAI is ready with detailed project reports (DPRs) for about 20,000 km of roads. The authority is planning to award another 4,500 km under the programme during 2020-21, while the balance will be awarded in the next one-two years. Currently, projects spanning about 11,000 km are under implementation, construction work on which is in progress. The plan is to complete these and then award new projects. Meanwhile, the authority is planning to complete about 4,000 km of roads under the programme during 2020-21.
As far as pre-construction activities such as land acquisition are concerned, NHAI has decided to go slow on the pace of award but plans to ensure that the projects are completed on time. Thus, the authority awards projects only after completing 90 per cent of the required land acquisition. Although the slow-award strategy has led to delays in meeting targets set under Bharatmala, NHAI is confident that it will be able to complete the programme by 2024-25, against the initial completion target of 2022. Although Covid-19 has strongly impacted project execution during the best months for construction during the year, the authority has been proactively taking steps to tide over the crisis. During March 2020, it made total payments worth Rs 250 billion to the contractors, including Rs 100 billion paid at time when the entire country was under lockdown. Besides, with support from different state governments, important construction activities were resumed during the lockdown itself. Despite labour availability issues, the authority has almost reached normalcy in operations now, and is hopeful of achieving its award and construction targets for the current fiscal year.
The BharatmalaPariyojana differs from the NHDP in terms of the planning process. While under the NHDP the emphasis was on upgradation of existing roads, Bharatmala entailed the collection of relevant data in 600 districts to identify the shortest possible greenfield alignments. Greenfield alignments have certain advantages over brownfield ones in terms of lower land acquisition cost and lower risk resulting in lower life cycle costs. Besides, upgradation of existing alignments often compromises on road safety due to lack of access controls, while greenfield alignments allow the possibility of incorporation of access controls to ensure road safety. NHAI has moved from providing connectivity to mobility, and the focus is on creating more expressways and access-controlled greenfield alignments. Adequate crossing facilities including underpasses, overpasses, tunnels and bridges, and wayside amenities are also being provided on the greenfield roads being constructed under Bharatmala, and this has led to an increase in the cost of the programme.
As far as freight movement is concerned, the BharatmalaPariyojana not only takes care of connecting two original destination points, but also ensures last-mile connectivity through its port connectivity and international connectivity components. The programme also envisages the construction of ring roads around select towns and construction of 35 multimodal logistics parks, which are set to reduce logistics cost significantly. Besides, NHAI is also focusing on ensuring electronic toll collection on access-controlled highways so that road users pay only for the distance they travel.
The road sector is the only one in which the government is exploring every segment of the market and trying to explore all possible models, from the build-operate-transfer (BOT) model at the time of the NHDP, to the engineering, procurement and construction (EPC) model and finally the hybrid annuity model (HAM). When the BharatmalaPariyojana was initially approved, the total cost was estimated to be Rs 5.35 trillion. However, this has now escalated to about Rs 8.25 trillion, with the major share of this increase attributable to high land acquisition and civil costs. The fact to be appreciated is that although the road sector has faced numerous challenges, NHAI has always been able to tide over them. Hence, the authority is hopeful of achieving the targets set under the programme by 2025, with funding support from toll collections.
NHAI’s initial plan was to implement about 30 per cent of the projects on an EPC basis, 60 per cent on HAM and the balance 10 per cent on BOT basis. However, in the current situation, BOT comprises only 2 per cent of the project awards, while the respective shares of EPC and HAM stand at around 55 per cent and 44 per cent. In the current fiscal year, the authority is focusing on increasing the share of HAM in total project awards. It is also looking to make the necessary modifications to HAM to make bankers more willing to support private highway developers opting for such projects. With regard to BOT, the existing model poses serious risks for private developers due to traffic uncertainty amid situations like demonetisation and the Covid-19 pandemic. Thus, the authority is coming up with a new BOT concession model to ensure adequate d-risking of the BOT operator. The new model concession agreement, expected to attract greater private investment in the road sector, is set to be launched in the next few months.
In order to help the road sector tide over the Covid-19 pandemic, the Ministry of Road Transport and Highways has taken a slew of measures to ensure adequate availability of funds with road contractors and highway developers. The relief measures provided by the ministry include relaxation of milestone payments, extension of concession agreements, early release of retention money and waiving of penalties. As far as funding constraints are concerned, NHAI is confident of addressing them through toll revenues. Not only this, the authority is looking to generate additional funds through innovative options such as the creation of an infrastructure investment trust and asset securitisation through special purpose vehicles.
Disputes worth Rs 700 billion are pending with NHAI. In order to address issues pertaining to disputes, the authority has set up an efficient mechanism for resolving them through conciliation. The mechanism comprises three committees headed by independent people, who can be approached by contractors/concessionaires for dispute resolution. Till date, NHAI has resolved disputes involving Rs 150 billion-160 billion, through a payout of around Rs 60 billion. Besides, it is also planning to introduce a dispute resolution board with an enhanced focus on resolving disputes even before they occur. Measures have also been taken by the authority to reduce the grievances of various stakeholders. Complaints are being recorded digitally through the recently launched datalake, while the authority is ensuring that they are addressed in a timely manner. Going forward, NHAI is confident of the efficacy of its initiatives and is optimistic about achieving its targets in a time-bound manner.