The National Highway Authority of India and the Road Ministry are looking to award 10,000 kilometres of road projects in FY16, G Suresh, Chief General Manager, NHAI told CNBC-TV18.
He said few orders have not been awarded this quarter so far, and that response to Build-Operate-Transfer (BOT) projects from road construction firms has been tepid.
Suresh said the details of the hybrid annuity model were being finalised. Under this model, the road developers will be shielded from the risk of revenue uncertainty caused by shortfall in traffic estimates. Also, the government will collect toll and pay the developer a share for recovering his investments.
Below is the transcript of G Suresh’s interview with Latha Venkatesh and Reema Tendulkar on CNBC-TV18.Latha: When we last spoke to Vijay Chhibber, he said that the plan is to tender for 9000 kilometers of roads this year, 50 percent probably by the Engineering, Procurement and Construction (EPC) process and 50 percent by Build-Operate-Transfer (BOT) process. Is that more or less the number we have to work with for the year, 9000 kilometers? A: If you look at that, the figures subsequently got revised. To my understanding it is around 10,000 kilometers between National Highways Authority of India (NHAI) and the ministry which has been proposed to be awarded. Roughly you can say that since there two more such EPC as well BOT hybrid annuity, there could be an equal division but then the issue will be again the market response. Depending upon the market response the actual kilometers awarded could either shift this way or that way.
Latha: Why did you say ministry, is the ministry target different from that of NHAI?A: Generally, if you look at that, NHDP is what NHAI has been executing and there are NHO and other special projects which the ministry has been issuing. Some part of the NHDP, the ministry itself is executing hence there could be a mix and match between ministry as well as NHAI. Iand it is always useful to have the kilometers counted as a total rather than individual between NHAI and the ministry. Reema: Could you help us with the full forms of NHDP and NHO?A: National Highway Development Project and NHO is basically National Highway Others Project. If you look in terms of the overall kilometers, the national highways in India is to the extent of 97,000 plus kilometers, NHDP is only around 50,000 kilometers plus. The balance would come into NHO or any other special projects which the ministry is handling including the projects which are currently under implementation in the north eastern region which is called as SARDP as well as some of the other projects which are in the naxalite infested areas.
So, the deviation is NHDP is basically a project which was conceptualised in 2000 at the time when Vajpayee was the Prime Minister. So, these projects are what basically is given to NHAI for execution and of which one particular phase that is phase four, part of it is being executed by the ministry. Reema: Wasn't it decided that the NHAI will acquire the land needed before the tendering process begins? What has been the pace of land acquisition considering the act is still in a limbo?A: Basically, if you look in terms of the overall award which was there in the last three years, they have not been able to reach the levels which we had actually anticipated, primarily due to the reason that the earlier years BOT was the primary mode and many of the projects which are bid out in BOT did not find any response.
However, then we took a decision considering the earlier experience we had that unless we have 80 percent land for BOT and 90 percent land for EPC we would not give the award. So, that position continues and as of now we are fairly well advanced as far as land acquisition is concerned. You must remember that land acquisition as well as the other pre-construction activities is a on-going activity, whether or not the award takes place these activities continue and most of the projects which are currently being planned for award are those which were earlier on the table but could not be awarded for various reasons including selection of mode not being accepted by the market and all. So, I would say that fairly good level of land acquisition is there and at the time of award we would be in a position to complete the required levels in terms of the contract provisions. Latha: How much of roads have been tendered so far, we are almost ending one quarter? A: As of now this particular quarter has not been very spectacular, I admit. NHAI is concerned, I think the award has been less or around 500 kilometers. However, the projects which are on the table are substantially large and I am sure that by the end of the year when the award phase actually picks up, the overall kilometers projected by us would be in a position to be achieved.Reema: Why has the awarding pace been so tepid in the first quarter?A: The approval process for most of the projects are yet to be completed, so, these are still enroute. Plus the ministry has been projecting one of the new mode of award that is the hybrid annuity. The documentation issues related to that are still to be ironed out and probably that is what is holding up the overall award kilometers. Latha: What is the amount available to you for viability gap funding this year?A: Viability gap funding is not the criteria, budgetary allocation would be the criteria. This year from the cess, we have been allocated around Rs 22,900 crore, plus our own toll collection and premium collection which is being ploughed back, that will be another Rs 6,500 crore. So, we are talking about roughly around Rs 29,500 crore being available to NHAI for the purpose of executing of these projects. In relation to the earlier years as such if I compare the last year, what the overall sector was receiving around Rs 13,000 crore of which we got around Rs 9,500 crore and the balance was in terms of toll collection plough back which was around Rs 6,000 crore. So, this time in fact we had asked for Rs 14,000 crore as allocation from the cess whereas we got Rs 23,000 crore. So, there is a sizeable step up as far allocation is concerned and that was also supposed to be matched with the higher level of awards. We were in fact told that in the last year plus this we should be in a position to complete the entire NHDP award. So, I believe that there could be some spillover to the next year as such due to the last year having lesser awards. However, as far as the money availability is concerned funds availability is concerned, it has been much higher than even what we had actually sought from the government.
Reema: Do you see enough applicants for your forthcoming projects?A: Yes, I mean if you see, most of the issues which is there in the market right now would be lack of equity as well as debt. So, some of these issues would be resolved by permitting the people who have completed the project to completely exit from the existing projects so that this money can be channeled in new projects.Latha: We also hear that NHAI is providing loans for the nearly-completed projects, those that are stuck for equity as you just pointed out?A: There is a policy for one time fund infusion which has been permitted again recently by the ministry along with this 100 percent divestment. The policy is broadly that for those people who have completed at least 50 percent projects physically and they have issues related to the overall fund availability in terms of debt or equity, the government would step in and provide the funding for the purpose of completing the project.
However, this will be subject to the condition that out of the initial toll flows, the government would recover the investments made and thereafter the lenders and the developers would be able to take their return out of the project.Reema: Is there a bunch of unfinished projects that will see accelerated fruition?A: We are looking at the stressed projects, if you see there are on-going projects which are continuing to make their execution. We are looking at projects which are stressed and also which has completed at least 50 percent and where for various reasons the lenders as well as the developers are unable to inject money and there we will give the assistance as such.
Overall around 18 projects have been identified as stressed. It all depends upon how many projects the lenders as well as the concessioners would be worked together with the government to see that these come into completion so that they can start earning revenues.Latha: In the next quarter or in the remaining part of 2015, how many road kilometers are likely to tendered?A: I would say in 2015-16 the overall award is 10,000 kilometers. So, I would say that there could be a sharp step-up as far as the award is concerned. Both the ministry as well as NHAI would be awarding not less than around 5,000-6,000 kilometers in the balance two quarters of this year itself.
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