Maintenance of highways: Will foreign companies do a better job?

Since the lockdown rules have lifted significantly, I’m sure a lot of you are itching to go out on a road trip. If you’re in the market looking for something that will help ferry the entire family, here’s a list we think could make that choice easier.

Looking to ensure the maintenance of highways doesn't get mired in unnecessary delays, and quality checks are in place, the Ministry of Road Transport and Highways is reportedly looking to lure foreign entities.

The ministry recently also tweaked hybrid-annuity model contracts to encourage private companies.

Samir Kanabar, Partner, EY India, told Moneycontrol that the move may become a gamechanger for the sector.

He also said their ability to compete with local companies needs to be factored in.

"There is dearth of financial options locally. The government’s ambitious infra plans need huge funding boost. India is heavily dependent on road infrastructure. The government needs to ensure that the road network remains robust enough and ensure that the supply chains and logistic management happening through road infrastructure. The ability to offer quality services at competitive prices is going to be an interesting proposition for them. But I believe that apart from funding and technology, they would be deploying local resources. So, that would boost employment and the companies that provide raw materials," Kanabar said.

He added that since the contracts for the highway stretches are expected to be in the range of 13,000 – 21,000 kilometres, there are hardly many companies in India who possess the war chest to bid for these projects.

"These big-ticket projects need companies with a strong balance sheet and global credentials," he said.

The government has been taking steps to stave off negative sentiments in the roads sector, which includes frequent milestone payments.

Highway contracts are also being awarded at a higher pace and seem to be getting over the COVID-19 jitters.

Due to the restrictions put in place in April and May to curb the spread of the deadly coronavirus, highway construction suffered a big jolt.