New Delhi: Despite the best efforts of the National Democratic Alliance (NDA) government over the past two years, road projects are still languishing, new data shows.
In the April-June period, only a quarter of the highway projects due for completion became operational; this is the second deadline these projects have missed, shows data from the National Highways Authority of India (NHAI) website.
The delays are mainly on account of land acquisition and financial problems.
In the first quarter of fiscal year 2016-2017, of the 30 projects scheduled for completion, only seven have been completed. Out of these 30 projects, 27 were due for completion in June; only six of them have been completed and are ready for operation.
Projects like six-laning of the Gurgaon-Kotpuli-Jaipur road and the Chennai-Tada road in Tamil Nadu; and four-laning of the Ganga bridge-to-Rama Devi crossing and the Agra bypass in Uttar Pradesh are almost four years past their original deadline.
According to project directors at NHAI, the most common reasons for these projects getting delayed are land acquisition problems, financial stress at the concessionaire, political unrest and insurgency (in north-eastern parts of the country) and delayed railway clearances in some cases. Some projects are likely to be delayed more because of the onset of the monsoon.
“In all these projects, land acquisition and funding issues have been the two major reasons for delay and we are doing our every bit to tackle these issues. In recent times we have been very pushy about acquiring land and have been able to acquire it much faster for new projects. Expenditure on land acquisition has increased substantially from the previous year. Also, we have been meeting with banks on a regular basis to solve the funding problem,” said Anand Kumar Singh, member (projects), NHAI.
Land acquisition has been a chronic problem in road projects, some of which never took off. The government has come up with solutions like providing equity as well as higher compensation (four times the actual cost) to farmers.
“It has been seen from the past two years that unless 80-90% of the land is acquired and a Right of Way (ROW) is made available to the concessionaire, no projects would be allotted by the NHAI. We can hopefully see a reduction in the number of such cases in the coming future,” said Abhaya Agarwal, partner and PPP (public-private partnership) leader at consulting firm EY.
Such delays in road projects also impact the rating assigned to them by credit assessors.
“In case of substantial delays in the project, the responsibility of the execution would increase for the sponsor since they would now have to bear the increased cost of interest during construction and other cost escalation. This could have a negative impact on the project’s rating,” said Maulesh Desai, senior manager, Care Ratings.
Care Ratings has assigned ratings—or revised already assigned ratings—in the sub-investment grade category to 12 under–construction road projects in the last two years because of subdued project progress, substantial cost overruns and weakened credit profile of the sponsor.
“A majority of the projects that have witnessed considerable time and cost overruns have been awarded in or before 2013,” added Desai.
The government has undertaken a number of steps to revive as well as hasten the pace of construction of national highways.
One is the hybrid annuity model introduced last year which is expected to increase the pace of construction as it takes into account all the drawbacks of the conventional EPC (engineering, procurement and construction) and BOT (build-operate-transfer) models.
Under this model, the total project cost would be shared in a ratio of 40:60 between the government and the project developer, respectively.
Last year, the government had decided to offer one-time financial assistance to revive physically incomplete and languishing national highway projects. Only those national highway projects where 50% of the construction had been completed till 30 November 2014 qualified for this.
The ministry of road transport and highways has also undertaken an initiative to set up land acquisition cells across the country for immediate disbursal of land compensation to be paid to farmers whose lands have been acquired.