New Delhi: At a time India’s highways regulator is facing difficulties in attracting bids for its projects, 19 companies have made 46 bids for five road packages being offered by the Gujarat state government under the annuity model.
“The technical evaluation process is currently on. After this process is completed, we will open the financial bids,” said Suresh Kumar, chief operating officer of India infrastructure Initiative, which has been hired by the state government for its road programme.
Good show: A file photo of workers at a highway construction site. Sanjit Das / Bloomberg
India infrastructure Initiative is a joint venture between Infrastructure Development Finance Co. Ltd, or IDFC, and project management consultancy Feedback Ventures Pvt. Ltd.
Companies that have bid for the five road packages in Gujarat that measure a combined 640km include IL&FS Transportation Networks Ltd, GMR Infrastructures Ltd, Shapoorji Pallonji and Co. Ltd and Hindustan Construction Co. Ltd.
The project is the first phase of nearly 3000km of state highways that the state hopes to get the private sector to build. The first phase is estimated to cost Rs1,540 crore.
In the annuity model, the government offers yearly annuities to a private developer in exchange for financing, building and maintaining the highways.
Gujarat’s approach differs from the financing method preferred by the Union government in which the private developer gets his revenues by tolling road users.
Mint had earlier reported National Highways Authority of India’s (NHAI) problems in attracting bids for its projects after only one of 12 projects that were due in late January got a bid—apparently due to concerns over the veracity of its traffic projections.
“Annuity in effect is deferred payments. It is relatively easier (to raise debt from banks) because there is no traffic risk. What you are only taking basically is a government of Gujarat risk,” said an executive with Shapoorji Pallonji, who didn’t want to be identified because he was not authorized to speak to the media.
“In these times, nobody really has the risk appetite for going for big projects. NHAI and the government of India need to realize that not all projects can be done on a toll-road basis. They need to explore all options, whether it is contracts, EPC or toll,” said Arvind Mahajan, an executive director with consulting firm KPMG Advisory Services Pvt. Ltd.