The government has envisaged making India a $5 trillion economy within five years. It has also planned infrastructure investments of Rs 111 trillion during the five-year period 2020-25 under the National Infrastructure Pipeline (NIP). Such an infrastructure development initiative will expedite the much-needed growth in employment generation in the country. The road sector has high potential to revive the economy. At the recent Infrabuild event, Nitin Jairam Gadkari, Union Minister for Road Transport and Highways, and Micro, Small and Medium Enterprises, talked about the government’s initiatives in road development, the progress in road construction and future plans. Excerpts from his address…
Progress in construction
The Ministry of Road Transport and Highways (MoRTH) has created a record by constructing 534 km of national highways (NHs) in the week commencing January 8, 2021. It constructed 8,169 km of NHs between April 1, 2020 and January 15, 2021, at a speed of about
28.16 km per day. During the same period in 2019-20, 7,573 km of roads were constructed, at a speed of 26.11 km per day. The ministry is hopeful about crossing the construction target of 11,000 km by March 31, 2021 and achieving a construction rate of 40 km per day.
The MoRTH also awarded NH projects spanning 7,597 km during the period April 1, 2020 to January 15, 2021. In 2019-20, projects spanning 3,474 km were awarded during the same period. Thus, the pace of award has also more than doubled this fiscal. In total, 8,948 km of roads were awarded in 2019-20 and 10,237 km of roads were constructed.
The achievement assumes significance given the fact that the first two months of the current fiscal were lost due to the nationwide lockdown in the wake of the Covid-19 pandemic. The ministry has taken several initiatives to increase the pace of construction. It is expected to increase further in the remaining months of the current financial year, which are conducive for construction activities.
Under the Bharatmala Pariyojana Phase I, 24,800 km of network is planned to be completed by 2022. As of December 31, 2020, about 30,063 km of roads have been awarded and 3,788 km of roads have been completed.
The government plans to construct over 50,000 km of roads in the next five years at the rate of 40 km per day. The MoRTH has identified 2,478 projects under the NIP, with an anticipated investment of around Rs 20 trillion.
Opportunities in the road sector
The government has introduced a slew of policy reforms in the Covid-19 era for contractors and developers. The relief measures include extension of time, direct payment to subcontractors, waiver of penalty in case of a delay in the submission of performance security/bank guarantee, and compensation for loss in toll collection fees. The important benefits provided to contractors and developers for ease of cash management include more frequent payments beyond contractual terms, reduction in performance bank guarantees, no additional performance security in case of lower price bids, and the abolition of bid security at the time of bidding. Further, the model concession agreement for build-operate-transfer (BOT) (toll) projects has been amended to address investor concerns and ensure better project preparedness, revenue protection and cash flow management. The government is changing the focus of public-private partnerships from structures that allocated the bulk of the project-related risk to the private sector, such as BOT, to relatively safer project structures with low risk, such as the hybrid annuity model.
The government has planned to set up an infrastructure investment trust (InvIT) platform for regular monetisation of road projects and to create an opportunity for long-term investors to commit long-term capital. The government has started to identify monetisation, privatisation, and strategic disinvestment as feasible routes to offload operational public assets in the infrastructure space and attract global institutional investments. The toll-operate-transfer model has been welcomed by the investor community owing to the asset classes on offer, which have predictable and well-established cash flows.
Toll collection has already crossed the pre-Covid-19 levels and is rising at the rate of 10 per cent year on year. At this rate, the government will collect Rs 1.34 trillion in toll by 2025. The government is also permitting 100 per cent foreign direct investment (FDI) in the road sector. There is an opportunity for joint ventures; however, there should not be any compromise in the quality of construction. The dispute resolution procedure has also been streamlined to avoid litigation.
The government aims to reduce logistics costs to below 10 per cent of GDP. To this end, it is developing inland waterways, air connectivity and road networks at large. The Bharatmala Pariyojana envisions the development of 26,000 km of economic corridors, which, along with the Golden Quadrilateral and the North-South and East-West corridors, are expected to carry the majority of freight traffic on the road. Further, about 8,000 km of inter corridors and around 7,500 km of feeder routes have been identified for improving the effectiveness of these corridors. The Bharatmala Pariyojana also covers the development of 35 multimodal logistics parks (MMLPs) at various locations across the country. The foundation stone for the first MMLP, at Jogighopa (Assam), has already been laid. Other MMLPs, in Nagpur, Chennai, Varanasi, Surat and Bengaluru, are being expedited.
The government is working towards the development of 22 greenfield expressways. The Delhi-Meerut expressway is expected to be inaugurated soon. A special purpose vehicle has been formed for financing the construction of this expressway. Besides, three packages of the Bengaluru-Chennai expressway have been awarded.
Going forward, a global positioning system (GPS)-based toll collection system has been proposed to be introduced. The GPS-based system will deduct the toll amount automatically based on the movement of vehicles. In order to ensure quality of construction and road safety, the government plans to do away with the independent engineer system and instead put in place a project management consultancy (PMC) system. The collective effort of contractors, PMCs and project directors is required to rectify the detailed project reports and reduce road accidents. In fact, the first-ever National Road Safety Month was inaugurated in January 2021 to build awareness about road safety and reduce road accidents in the country.
The government is creating an integrated roadmap for alternative fuels such as bio-CNG, liquefied natural gas, biodiesel and ethanol. Using CNG in place of diesel as a fuel can lead to cost savings of 50-60 per cent. Thus, construction equipment manufacturers should promote the use of alternative fuels to reduce pollution. Talking about the environment, contractors/developers must undertake tree transplantation. They can engage with non-government organisations, universities, social organisations, etc. for the same. A committee will be appointed by the government to monitor tree transplantation initiatives by road developers. There must be social consciousness among all the stakeholders regarding the environment.