With the government’s desperate attempt to revive private investment, the road and bridge sector is on its way to move forward
Over the years, road activity in India has gradually increased with the improvement in connectivity between cities, towns and villages. With 4.7 million km, India has the second largest road network in the world. In fact, the road network transports more than 60 per cent of all goods and 85 per cent of passenger traffic.
With burgeoning e-commerce, automobiles and freight movement, the importance for good road network is paramount. Understanding this need, the Government of India has set aside 20 per cent of the investment of $1 trillion reserved for infrastructure during the 12th Plan (2012-17) to develop the country’s roads.
Present scenarioThe value of roads and bridges infrastructure in India is projected to grow at a CAGR of 17.4 per cent over FY12–17. The country’s roads and bridges infrastructure, which was valued at US$ 6.9 billion in 2009, is expected to touch $ 19.2 billion by 2017. The financial outlay for road transport and highways grew at a CAGR of 19.4 per cent in the period FY09-14. For FY14, India’s Planning Commission provided an outlay of US$ 6.9 billion for the roads segment.
Moving projectsLaw and order compounded with other problems had stalled several road projects. Last year, projects worth Rs. 1,500 crore could not be taken up there out of sanctioned Rs. 6,000 crore.
However, the Modi-led government has recently approved projects worth Rs. 80,000 crore, and there are several countries which are eagerly waiting to join hands for India’s infrastructure growth. One such country is Japan which has offered to assist India in developing Intelligent Transport Systems (ITS) in urban areas of the country. In collaboration with Japanese investors, the Indian Government has planned to set up a finance corporation with an amount of Rs. 1 trillion ($16.22 billion) to fund projects in the roads segment. The Japanese partners are expected to have a 26 per cent stake with assured returns of nine per cent.
Some of the most important developments and projects in the Indian roads sector are: • The government would soon approve road projects worth Rs. 11,000 crore for extremist-hit states and would rope in military engineering services for faster building of roads in these areas.
• L&T Infra Debt Fund Ltd., which has succeeded to receive funding for road projects worth Rs. 1,000 crore, has already approved financing for 10 proposals for about Rs. 1,000 crore. Even Toronto-based Canada Pension Plan Investment Board (CPPIB) plans to invest about $332 million in infrastructure projects in the country through an investment with Larsen & Toubro (L&T).
• Under the Pradhan Mantri Gram Sadak Yojna (PMGSY), Union Minister Nitin Gadkari has recently approved 28 rural road projects worth Rs. 438 crore in Leh and Kargil districts in the Ladakh region of Jammu and Kashmir.
• For widening the 127 km Patna-Gaya-Dobhi section of NH 83 in Bihar, National Highways Authority of India (NHAI) has sanctioned Rs. 1,232 crore order to IL&FS Engineering and Construction Co. Ltd.• The ministry has also sanctioned IRB Infrastructure Developers Ltd. to operate and maintain the Mumbai-Pune Expressway and the old Mumbai-Pune highway till 2023. The concession period for this project is over eight years and IRB will be allowed to collect toll for four years staring 2019.
Government initiativesThe previous government failed to get any bids for at least 21 projects worth Rs. 27,000 crore between fiscal years 2013 and 2014. However, the new government has been taking several measures to smoothen the road sector. The new government has been permitting rescheduling of premium commitments of developers, allowing an early exit to developers through the substitution route to free up capital and de-linking of environment and forest clearances.
The ministry has targeted the National Highways of 8,500 km under various schemes like National Highway Development Project (NHDP, 6,500 km), National Highways Interconnectivity Improvement Programme (NHIIP, 500 km), Special Accelerated Road Development Programme in North-East (SARDP-NE, 1,000 km) and Left Wing Extremism (LWE, 500 km).
Prime Minister Narendra Modi has visioned new modes of infrastructure development in India. The modes include nationwide connectivity networks of roads, gas grids, water grids and power transmission lines. PM Modi has already planned four laning of Pune-Solapur National Highway No. 9 section and the 765 kV Raichur-Solapur transmission lines.
The new government is hoping to match India’s standard with international nations like Germany, Japan, the US and Singapore which will reduce the cost of construction by 15 to 20 per cent.
Improving mobility“Improving conditions of roads in the country for swifter and safer movement of vehicles is priority of the government,” announced Nitin Gadkari, minister of road transport, highways and shipping. He assured that in the next three years, trucks on roads will be able to cover up to 600 k.m. per day.
The minister said the government is brining changes in the Motor Vehicles Act of 1988, and a Bill in this regard with several innovative steps will be introduced in the next session of the parliament. Emphasising on bringing down cost of construction of roads while improving quality, the minister said the government is giving priority to construction of cement-concrete roads as they have low maintenance cost. He added that many of the stalled road projects have been restarted by the new government, while bottlenecks in the others are being addressed.
Expressing concern over high rate of accidents in the country, the Minister said that poor road designing at several places is a basic reason for this. He said the Government is looking into the issue. The Minister said e-Toll introduced at toll gates in the country will help in reducing the waiting time of vehicles which presently costs 2-3 per cent of GDP. The government is also planning construction of truck terminals and truck clubs with facilities such as dhabas, rest rooms, toilets etc.
New modelsThe new government is in a desperate attempt to revive private investment in the roads sector and working had enough to correct all the previous mistakes. It is estimated that the government requires nearly Rs. 2 trillion to fund 20,000 km of road construction under the National Highways Development Project over the next 4-5 years.
Now the roads ministry proposes new hybrid annuity model of highway development which reallocates risks. The new model deviates from the existing models through reallocation of risks in road construction.
In this new model, investors will not only contribute only 60 per cent of the project cost but also be relieved of the burden of collecting tolls. The government will pay the developer a biannual annuity for recovering investment and interest costs and fee for operations and maintenance. Under the model called build-operate-transfer (BOT), the government hopes to address issues like access to finance, inaccurate revenue assessment and delay in clearances that have pushed back private sector from the roads sector.
Mr. Gadkari said at a CII conference that the idea is to provide a transparent, time-bound mechanism to fast-track decision making and anticipating solutions to issues that could arise through a built-in approach so that private sector interest is revived.
The ministry had identified 13 projects stretching to 1,100 km worth Rs. 14,442 crore to be awarded under this model as of now.
Bringing in transparency in payment process for NH worksThe government has inaugurated a web-based payment monitoring system to make payment process for National Highways (NHs) related works and services more transparent. Besides, the new monitoring system will also facilitate easy communication between various offices and allow a user to track the status of a bill.
By using this system ministry can independently check position of processing of bills office wise and utilisation of funds scheme wise. Feedback generated from the system will assist ministry in identifying bottlenecks and making entire process mechanism more efficient.
For payment of works and services related to NHs, division offices of Public Works Department (PWD), after verification of bills, forward it to the Regional Office of the ministry. Regional Officers, after exercising checks in the capacity of Drawing and Disbursing Officer, forward bills to Regional Pay and Accounts Office which makes the payment. The ministry has already issued direction to entertain bills on the first cum first serve basis. Time limit of five working days to dispose off a bill has also been prescribed.
Road aheadWith increasing population and urbanisation, India needs a robust infrastructure. The government, through a series of initiatives, is working on policies to attract significant investor interest.
The Indian Government has planned to develop a total of 66,117 km of roads under a series of programmes, including National Highways Development Project (NHDP), Special Accelerated Road Development Programme in North East (SARDP-NE) and Left Wing Extremism (LWE). In order to achieve 66,117 km of roads, the government has also planned to build 30 km of road a day from 2016.