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Finmin takes a U-turn on road norms

Finmin takes a U-turn on road norms
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First Published: Mon, Aug 18 2008. 12 10 AM IST
Updated: Mon, Aug 18 2008. 12 10 AM IST
New Delhi: The Union finance ministry wants to scrap the qualifying criteria it helped put in place for highway projects in 2007 for the same problems cited by companies and an industry body in opposing the rules: fears of cartels forming and the exclusion of small and medium-size companies.
The ministry has already sent a new recommendation to this effect to the Planning Commission, India’s apex policy planning agency, a finance ministry official, who didn’t want to be named, said.
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The ministry now shares the view of the National Highway Builders Federation, the industry body that wants a change in the rule that currently limits the number of bidders to five or seven.
“We had sought opinions of various consultants who had advised us that small and medium players could form consortia to bid for such highway projects. But, now it seems the current guidelines could lead to cartelization among a few big players,” said the official.
“My personal view, however, is that there should be some kind of restriction on the number of players. For instance, from five it can be raised to 10 or 15. Again, I feel if the two-stage qualification norms are removed, then minimum standards criterion be raised,” said the official, who is closely involved with the process.
If the whole process is changed, it would mean further delays in all the 40 projects for which firms have been shortlisted, he added.
Meanwhile, a senior Planning Commission official, who also didn’t want to be named, said its deputy chairman Montek Singh Ahluwalia will meet industry representatives shortly to discuss the issue.
While the two-stage pre-bid qualification (which involves an initial bid and then a price bid) was recommended by the Planning Commission, it was approved by an inter-ministerial group consisting of several ministries. The criteria for highway projects were part of the norms released by the ministry and the Planning Commission in May 2007.
The guidelines prescribe a formula for so-called “shortlisting”, or creating a list of bidders eligible to make a financial bid based on their experience in infrastructure projects. According to the rules, an experience score is compiled for each bidder and between five and seven firms with the highest scores are allowed to submit bids.
“A note (asking for a change in the rules) has been drafted and sent to the Planning Commission. We are awaiting its decision,” said another senior government official who, too, didn’t want to be named. “The PMO (Prime Minister’s Office) is also tracking this issue.”
It isn’t clear whether the rules, which apply to all infrastructure projects, will be amended just for highway projects or for others, too.
The government had earlier justified the shortlisting criteria, arguing that larger road projects require firms with a good track record in public-private partnerships, or PPPs, where private sector firms collaborate with the government to create infrastructure.
The Planning Commission had earlier recommended that ministries administering the projects could address any concerns over possible formation of cartels by restricting the number of projects a certain company could bid for within a specific time period.
Finance minister P. Chidambaram had sent a note to Ahluwalia on the issue, said another government official familiar with the matter, who didn’t wish to be named.
This official didn’t divulge the contents, and Mint couldn’t independently ascertain this.
Mint had on 7 August reported that delays in bidding for at least 53 highway projects were being attributed to problems caused by the guidelines. Bidders for a major highway stretch in Andhra Pradesh had also questioned the shortlisting criteria, as reported by Mint on 4 August.
A case against the shortlisting procedure filed by the National Highway Builders Federation is pending in the Delhi high court.
“It’s a good thing if they decide to resolve it (the shortlisting issues) because then, in the next six months, we can see some projects (completed),” said Amrit Pandurangi, who heads the transport and infrastructure practice for audit and consulting firm PricewaterhouseCoopers.
The finance ministry’s recommendations have to be ratified by Prime Minister Manmohan Singh’s committee on infrastructure for a new rule to come into effect.
Sangeeta Singh and Asit Ranjan Mishra contributed to this story.
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First Published: Mon, Aug 18 2008. 12 10 AM IST