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Feb 19, 2013, 04.54 PM IST | Source: Moneycontrol.com

Road sector needs nodal dispute resolution authority: CARE

CARE Ratings has come out with its report on Indian road sector. According to the rating agency, investment in road and bridge sector is projected at Rs 9.20 lakh crore during the Twelfth Five Year Plan period ending March 2017, as against Rs 5.16 lakh crore invested during the Eleventh Five Year Plan period ending March 2012.

CARE Ratings has come out with its report on Indian road sector. According to the rating agency, investment in road and bridge sector is projected at Rs 9.20 lakh crore during the Twelfth Five Year Plan period ending March 2017, as against Rs 5.16 lakh crore invested during the Eleventh Five Year Plan period ending March 2012.

Over the last decade, the government’s inititatives towards road sector have been directed both towards formalising an adequately robust and comprehensive policy framework relating to, inter alia, private sector participation, model concession agreements and the process of awarding road contracts, as well as in facilitating expeditious implementation of projects across the country.

The Government has been augmenting the allocation of funds to the road sector through the past few Five Year Plans. Investment in road and bridge sector is projected at Rs 9.20 lakh crore during the Twelfth Five Year Plan period ending March 2017, as against Rs 5.16 lakh crore invested during the Eleventh Five Year Plan period ending March 2012. A target of 8,800 kms of road in 2012-13 has to be met with an allocation Rs 25,360 crore. It is further expected that 1,000 km of expressways would be completed during the Plan, while land for another 6,000 km would be acquired to initiate work.

Fruition of these ambitious plans has remained a challenge given that the sector remains mired in several issues. The recent episodes of exit from two prominent developers from BOT road projects, only reinstate the issues faced by the participants. The high quantum of projects facing delays in execution owing to regulatory hurdles, delays in grant of approvals, land acquisition issues, dispute resolution, capacity constraints and funding limitations only worsen the scenario. Whilst the former four emanate from the overall policy and regulatory framework, the remaining are issues prevailing with the private sector. Of late, the issues have gained so much ground that the envisaged pace of progress in awarding fresh projects through private participation as well as completion of awarded projects have suffered a colossal setback.

Even NHAI faced a major blow when road transport ministry asked them not to go ahead with the Rs.10,000 crore tax-free bond issue in January 2013. This signal from the roads ministry has come after the finance ministry had expressed concerns over the inability of the highways authority to fully utilise the money raised through tax-free bonds (Rs.10,000 crore) in the last fiscal, mainly owing to tardy pace of project awards. This definitely has tightened the strings of NHAI’s purses which required higher quantum of funds for rolling out bids in EPC mode, in the backdrop of lower projects awarded on premium basis.

Disclaimer: This report is prepared by CARE Ratings, which has taken utmost care to ensure accuracy and objectivity while developing this report based on information available in public domain. However, neither the accuracy nor completeness of information contained in this report is guaranteed. CARE Research operates independently of ratings division and this report does not contain any confidential information obtained by ratings division, which they may have obtained in the regular course of operations. The opinion expressed in this report cannot be compared to the rating assigned to the company within this industry by the ratings division. The opinion expressed is also not a recommendation to buy, sell or hold an instrument.

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