Kamal Nath steps on gas but familiar roadblocks remain

Kamal Nath steps on gas but familiar roadblocks remain
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First Published: Sun, Aug 09 2009. 09 22 PM IST

 Development road map: Road transport and highways minister Kamal Nath has detailed 165 projects, including the 38 for which bids are on. Harikrishna Katragadda / Mint
Development road map: Road transport and highways minister Kamal Nath has detailed 165 projects, including the 38 for which bids are on. Harikrishna Katragadda / Mint
Updated: Sun, Aug 09 2009. 09 22 PM IST
New Delhi: Road transport and highways minister Kamal Nath may have hit the ground running when he took charge in May, but analysts say familiar problems such as as the pace of land acquisition and problems surrounding the shifting of utilities won’t go away in a hurry.
Development road map: Road transport and highways minister Kamal Nath has detailed 165 projects, including the 38 for which bids are on. Harikrishna Katragadda / Mint
The minister, in the weeks since assuming charge of the ministry, announced structural changes in the National Highway Authority of India (NHAI), met state ministers, pushed for a new form of project development that would help make most projects viable for the private sector, and talked up a separate expressway authority and a road finance corporation.
The ministry has initiated bidding on some 38 projects worth an estimated Rs42,331 crore spanning around 3,552.63km this year. Starting January this year, the highway authority has also awarded 10 projects worth an estimated Rs10,966 crore spanning 972km.
Bids for a further nine projects, spanning 728.43km and costing some Rs8,205 crore, are currently under evaluation by the authority.
In a recent response to questions in Parliament, Nath detailed some 165 projects, including the 38 for which bids are in progress as well as several for which feasibility studies have been undertaken. The minister said work on these projects is likely to commence within eight months from the date they are awarded.
The announcements come in the backdrop of continued criticism over delays that plagued the highway sector in the first five years of the United Progressive Alliance (UPA) administration, with the government failing to finish any of the 47 projects in the second phase of the north-south-east-west corridor, which falls under the national highway development programme, as Mint reported in December.
Three-fourths of the 5,300km-long, four-laned highway network, the Golden Quadrilateral, which envisaged connecting New Delhi, Mumbai, Chennai and Kolkata, had been already completed when the UPA took over. A part of the remaining 25% is still unfinished.
Highways were among the key sectors the government had identified to soak in $60 billion (Rs2.9 trillion) of investment in the five years to 2012.
The government estimates India should invest some $500 billion in its infrastructure by 2012 to attract foreign investment and boost economic growth.
Announcing a target of building 20km of roads a day, a target that some NHAI officials and analysts said was ambitious, the minister talked about reorganizing the highway authority so officers could be held accountable and about raising a dedicated cadre for the authority. Much of the authority’s staff are deputed from various state governments or from the ministry of road transport and highways.
“There’s some re-energizing, some push now. But for things to really get off the ground would take six months,” said Ankineedu Maganti, a director with Soma Enterprise Ltd, a Hyderabad-based infrastructure developer with interests in power and highways. Maganti said the financing situation had improved over the last six months, with lenders expressing interest in projects being bid for.
According to a recent Planning Commission report, up to March, 95 projects with a combined investment of Rs46,369 crore had been awarded under the public-private partnership (PPP) route, while a further 45 projects worth some Rs55,047 crore have been approved by the PPP approval committee and are at various stages of bidding.
The Centre has also approved viability gap funds for some 42 state highway projects worth Rs15,173 crore.
According to some analysts, while the availability of project finance is no longer in question, the ability of developers to access the money is. “There is a lot of liquidity. Exposure is not a problem. Banks have a lot of money. But bankers are asking for guarantees,” said Amrit Pandurangi, who heads the transport and infrastructure practice for consulting firm PricewaterhouseCoopers.
In what could be a sign of the changed circumstances, the number of bids for each project has declined from between eight and nine bids in 2007 and early 2008 to as few as two bids in recent times, Pandurangi said.
Land acquisition has often been cited as one of the foremost concerns for highway developers. Mint reported on 18 March that an official review found land acquisition was the cause for delays on 70% of some 190 infrastructure projects, of which 40 were national highway projects.
“One direction where infrastructure needs to move is an easier exit (for developers) so that it becomes easier to recycle capital,” said S.R. Ramanujam, chief executive officer of Crisil Risk and Infrastructure Solutions Ltd. That would open up the sector to a whole new class of investors who don’t want to take construction risk but might want to hold equity positions, he said.
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First Published: Sun, Aug 09 2009. 09 22 PM IST