In an interview to CNBC-TV18, Satish Chandra,member-finance, NHAI, says the company started bidding out projects only post September 2014.
The company had a target of 5500 kms of which 3500 kms was to be done under engineering, procurement and construction (EPC) and the remaining 2,000 under build–operate–transfer (BOT).
“We have been able to award only 500 kms or so for BOT and 2,500 kms of EPC projects are under bidding in the month of December and January and we are quite hopeful of awarding the entire 5,500 kms length by March 2015,” he adds.
Below is the verbatim transcript of Satish Chandra’s interview with CNBC-TV18\\'s Latha Venkatesh and Sonia Shenoy.
Latha: There are quite a few projects that have been put out for bidding, 52 projects with an investment of over Rs 50,000 crore and about 4,200 kilometres of roadways. How much realistically do you think will happen in the current financial year?
A: In the current financial year we had a target of 5,500 kms out of which 3,500 was to be done under engineering, procurement and construction (EPC) and the remaining 2,000 under build–operate–transfer (BOT). For BOT the response is not much, we have been able to award only 500 kms or so and 2,500 kms of EPC projects are under bidding in the month of December and January and we are quite hopeful of awarding the entire 5,500 kms length by March 2015.
Latha: What has been the response for this 2,500?
A: They are under bidding, by December end and January. So, we should have no problem regarding response for EPC projects.
Latha: Under EPC nothing at all has been bid out yet?
A: Actually when this government came to power they decided to delegate more powers to ministry and there was lack of clarity and only in months of September-October it was decided that the ministry can award projects up to Rs 1,000 crore. It was only October and November that we started bidding out the projects. So the main activity will take place only in January 2015 or February-March.
Sonia: You said you are hopeful of awarding 5,500 kms by the end of FY15. What is the road project target for FY16 both in the EPC and the BOT segment?
A: As of now we have 20,000 kms balance road length which is yet to be awarded out of this 8,500 kms would be awarded in the current year, including NHAIs 5,500 and the ministry’s 3,000 kms. Next year the remaining length of 12,000 kms would be awarded in 2015-16 out of which NHAI target is about 9,000 kms.
Sonia: Do you see more players likely to bid for EPC projects rather than BOT projects? What could the response look like in your mind because so many of these players are still under quite a bit of balance sheet stress?
A: We are not hopeful of getting adequate BOT response and out of these targets we are targeting that at least two third lengths will have to be awarded on EPC mode and BOT will be awarded over more than one third kilometre length of these targets. So, we have already decided that most of the activity would be in EPC mode and not in BOT mode.
Latha: You said that you have about 3,500 of projects. This is, I guess, kilometres that you are referring to. What is the total amount that is available with NHAI for these 3,500 kilometres of EPC projects?
A: Current year we have Rs 25,000 crore in 2014-15 and 2015-16 it would be about Rs 30,000 crore and for awarding all these projects in EPC mode we will require about Rs 180,000 crore during the next four years and we have submitted a financing plan with the ministry and ministry of finance.
Sonia: In the last few months I understand that NHAI has introduced many steps to smoothen the entire implementation process. How has that worked so far?
A: During last few months for change of board our ministry has been authorised. Secretarial committee headed by secretary of Ministry of Road Transport and Highways (MoRTH) can decide which project to be awarded in BOT, which project to be awarded in EPC. Earlier ministry’s power was only up to Rs 500 crore, now all projects upto Rs 1,000 crore can be appraised and approved by the ministry itself.
Environment ministry have also been very helpful. They have delegated the powers for grant of forests clearance to their regional officers. Earlier these cases were required to come to the the Ministry of Environment and Forests (MoEF) first for forest stage clearance one and then stage two. Now all these powers have been delegated to the regional officers and it would save us about six to eight months time.
Railways have also been very proactive. There were a lot of problem regarding GAD, ROB/RUB approvals. Now, standard designs have been in place on website and we can apply online and get the clearance in no time.
Latha: That is very positive. Basically you have said that there is about Rs 25,000 crore.
A: Finally a committee headed by ministry of MORTH and shipping and comprising of ministers of MoEF, Railways and ports who is also our minister has been constituted to sort out all these inter ministerial issues. So with these steps we should have no problem now.
Latha: So, these Rs 25,000 crore worth of projects that you are going to put out in EPC are fully cleared or are you saying that a process is in place to get all the clearances?
A: About 50 percent of the projects have already been cleared and the remaining projects are in the ministry at various levels and we are quite hopeful that by 15th January or so all these projects would be cleared.
Latha: Fully cleared in terms of environment, railways everything?
A: No, in terms of environment, land acquisitions they are already clear.
Latha: Now this Rs 25,000 crore compares with how much last year? It is a percent increase of how much assuming the entire Rs 25,000 crore will be bid out?
A: Rs 25,000 crore is our Budget, the project length to be awarded is 5,500. Their cost would be about Rs 60,000 crore and this amount will be spent during the next four years because when we award projects it takes about three to four years. Two and half years to complete and final payments etc.
Latha: Either in terms of the kilometres of projects that you will bid out or in terms of the money that you are likely to have spent this year, can you give us some comparison. I just want to know whether things are better and if yes, how much?
A: Last year we were able to award only 1,500 kms in FY14. Till November we have been able to award 1,600 kms this year and we will be able to award remaining 3,900 kms and will complete the target, so this year be definitely better than FY14.
Latha: And the money spent?
A: Money spent is not relevant because when we award the project the money is spent in the next three to four years.
Latha: There will be historical projects awarded for which you are spending now. So you can still give me an idea of how much you are spending this year versus how much you spent last year?
A: Last year we spent about Rs 19,000 crore and this year we will be able to spend about Rs 25,000 crore.
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