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NHAI has set a target of awarding 9,500 kilometers of road projects in FY13. Out of which about 3,000 kilometers would be awarded on engineering procurement and construction (EPC) basis. Around 5,000-6,000 kilometers (50-55 projects) of the total will be awarded on build -operate-transfer (BOT) toll or BOT annuity basis.
The National Highways Authority of India (NHAI) cancelled two projects awarded last year because they couldn’t achieve financial closure. In an interview to CNBC-TV18 AK Upadhyay, chairman, NHAI said these projects would be now put up for fresh bidding.
"In the history of last three years starting from 2009 out of 147 projects awarded these are only 2 which have failed to achieve financial closure. So, I would say that the market is mixed," he added. He don't see further cancellation of projects due to funding issues.
Meanwhile, NHAI has set a target of awarding 9,500 kilometers of road projects in FY13. Out of which about 3,000 kilometers would be awarded on engineering procurement and construction (EPC) basis. Around 5,000-6,000 kilometers (50-55 projects) of the total will be awarded on build -operate-transfer (BOT) toll or BOT annuity basis.
Below is the edited transcript of Upadhyay’s interview with CNBC-TV18. Also watch the accompanying videos.
Q: The market is quite concerned about the fact that two projects you awarded last year have been cancelled because they couldn’t achieve financial closure. What exactly happened and is this now up for a fresh bid or have they been passed onto the L2 bidders?
A: They have to be put up for fresh bids. But to look at it in the perspective, in the history of last three years starting from 2009 out of 147 projects awarded these are only 2 which have failed to achieve financial closure. Now let us look at another picture. Three projects were seen to be very aggressive last year, one was Ahmadabad-Udaipur-Kishangarh, it had a premium of Rs 636 crore and it was for GMR. That project has achieved financial closure in time.
The Ahmadabad Vadodara which had Rs 309 crore premium also achieved financial closure. The Pali-Beawar-Pindwara which had Rs 251 crore premium also achieved financial closure for L&T. So, all these three mega projects which were seen as very aggressive last year and all the big companies have achieved financial closure.
Two projects which we awarded first in this current fiscal have also gone on a very high premium. So, I would say that the market is mixed. For the two projects which failed to achieve financial closure, I would say that for one case it was their internal problem. I would say one case has failed and that’s not such a bad situation, because at the same time we are also getting big projects getting financial closure.
Q: Who were the two companies that were involved with these two projects that have now faced cancellation and what kind of premiums and size of projects were we talking about?
A: I won’t like to take names. You already mentioned they are two projects. Let’s leave at that. We hope that there should be no problem because we are also having a dialogue with the bankers and concessioners in general, we are brainstorming and looking at what are the generic problems across the sector. As of now we don’t see a matter of concern.
Q: You had set out a target of 8,800 kilometers for FY13 in terms of road projects and the Prime Minister revised this target upwards. In your sense how doable do you think this target is of 9,500 kilometers for FY13 and the bigger problem has been follow through or implementation of these. On that account how easy do you think it will be for both financial closure and for implementation of these projects?
A: Let me mention two or three points. One is that out of these 9,500 kilometers, a fairly good number would be also EPC (Engineering Procurement and Construction) now. Last year all the 62 projects taken together of ministry of about 8,000 kilometers were PPP projects, but necessarily as we award the better projects we would have some stretches which may not be viable on BOT toll. So, we are expecting that about 3,000 kilometers out of this target would be EPC, cash funded projects.
That doesn’t depend on the financial closure or the lenders or the investment. So that is government funded and we are well funded for that. So take out 3,000 kilometers. We are talking about essentially 6,000 on BOT toll. When the PM revised the targets upwards we also got an assurance and confer that as we go along in case we face any difficulties and there will be intervention from the highest level to resolve those difficulties. We saw that last year and we are all aware that last year our very impressive achievement was also in account for the support from the topmost level including PMO.
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