New Delhi: India’s roads ministry intends to snip red tape to hasten awarding highway contracts and ease exit rules for builders that could free up working capital.
A meeting of senior officials at the Prime Minister’s Office (PMO) is likely to discuss on Monday the ministry’s proposals that suggest reducing the number of approvals required to open bids for road-building projects awarded through competitive bidding after the National Highways Authority of India (NHAI) clears them.
“Currently, every proposed project has to go through several layers of clearances even before it can be opened for bidding. We are working on ways to speed up projects off-take as there is a significant slump in the projects being awarded,” a roads ministry official said on condition of anonymity. “The proposal is to streamline and rationalize the pre-tendering approvals required to open bids for a project. We are trying to bring down the number or stages of approvals needed both for projects above Rs.500 crore and below Rs.500 crore.”
India needs to shore up its rickety infrastructure to facilitate economic growth and seeks to invest some $1 trillion in the next five years.
In the year to March, the government has given out contracts to build and widen only 1,010km of roads, woefully short of a target of 9,500km, Mint reported on 25 January.
“Bureaucratic delays need to be brought down. I believe NHAI board is capable of approving projects for bids. There is no need for going back and forth to different bodies for approvals,” said Parvesh Minocha, managing director of the transportation business at infrastructure consultancy Feedback Infrastructure Services Pvt. Ltd, “As for the suggestion for an early exit, it is a sensible suggestion as it will free up a lot of working capital and equity for fresh projects.”
The roads ministry proposes to ease the lock-in period for a concessionaire after it completes construction. “We believe a concessionaire should be allowed to divest completely after the commercial operations date, as long as the succeeding entity satisfies all necessary qualifications,” said the government official cited earlier. “This will mean a new shareholder replacing an older one in the existing special purpose vehicle, though the contract and legal implications will remain the same for the succeeding entity as they were for the original concessionaire.”
A concessionaire currently cannot exit a project until two years after starting commercial operations. “This (the new proposals) will, however, be subject to approvals from NHAI and the project lenders’ consortium,” said the ministry official. “The idea is to free up the concessionaires capital for future projects,” the official said.
A final view might be taken on these suggestions when senior officials from the Planning Commission, the environment and forests ministry and finance ministry meet at the PMO.
Another government official said the proposed cabinet note prepared by the highways ministry has been included in the agenda of the PMO meeting. He too declined to be named.
To be sure, an expert sounded a note of caution on relaxing exit norms.
“By allowing concessionaires to exit soon after completing construction, my concern is the impact on the long-term quality of the project, which should not be compromised and the concessionaire should be held responsible for any defects in workmanship and quality of the material used in the project,” said Pranavant, director at Deloitte Touche Tohmatsu India Pvt. Ltd, an audit and consulting firm. “The succeeding party should do a due diligence of the project they are getting into. The proposal to cut down approvals, however, is always welcome.”
A final settlement with regard to environment and forest clearances is also expected to be reached at the PMO meeting. The roads ministry expects a clearer picture on the environment ministry’s move to approach the Supreme Court for a clarification with regard to the 2011 Lafarge SA case on delinking environment and forest clearances, said the first official cited above.
This would enable NHAI to withdraw the case it had filed against the environment ministry. The highway authority had approached the apex court to seek a modification or clarification of the judgement that linked environment and forest clearances after the consecutive exits of GMR and GVK from their respective projects, citing delay in environmental clearances not being obtained by NHAI.