New Delhi: The National Highways Authority of India, or NHAI, is working on a plan to identify at least 50 cities it should connect on a priority, based on population and traffic volume, according to two persons familiar with the development.
If approved, this would be a departure from the current system, in which the authority divides the highway stretches under several phases of the National Highway Development Programme, or NHDP, and bids them out.
Mint could not immediately ascertain from NHAI if the existing process would be subsumed into the new plan.
NHDP consists of seven approved phases spanning some 32,000km of highways across the country.
India has a little more than 65,000km of national highways.
“There is a prioritization process going on. The cities will be selected based either on population or on transport volume,” said an NHAI official, who did not want to be identified.
“We have also set a ceiling of 1,000km to be taken up on an annuity basis. The minister (of road transport Kamal Nath) would like to increase this, but the government would have to take a call,” the official added.
In the annuity method of financing, the government pays highway developers an annual sum over the concession period, while the developer finances and builds the highway.
Government officials, in the past, have argued against the annuity method because of the budgetary implications. Instead, they would opt for the toll model, where the developer derives revenues through tolls.
Private developers, on the other hand, typically find it easier to raise debt under the annuity model because of the assured revenue streams from the government.
“This is a complete upside down of the earlier system. I don’t know how it will work,” said Siddhartha Das, national public-private partnership (PPP) practice leader, transaction advisory services, for consulting firm Ernst and Young Pvt. Ltd.
Das said the proposal could potentially delay the highway development programme because of the time it would take to create detailed project reports (DPRs). “DPRs (will take) one, one-and-a-half years minimum. Post that, you are looking at bidding these out. You have 63 DPRs (for projects that are currently in bid phase) ready. It (the proposal) should not be at the cost of the other projects,” he said.
On the 1,000km ceiling for the annuity model, Das said the authority probably hoped to shorten the process of gaining approvals for annuity projects.
Currently, the Union cabinet has to approve any change in individual projects from toll-based to annuity-based.
“But in roads for India, cabinet approval is not the problem. There are other structural issues,” Das added.