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Toll rights sweetener for widening roads?

Toll rights sweetener for widening roads?
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First Published: Thu, Jan 29 2009. 12 43 AM IST
Updated: Thu, Jan 29 2009. 12 43 AM IST
New Delhi: To sweeten the deal and encourage more private firms to bid for highway projects, the road transport ministry wants to allow winning bidders to run toll booths on four-lane highways as soon as they secure contracts to convert them to six-lane stretches and even before they tie up funds.
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The proposal has met with opposition from the country’s finance ministry because arranging finances (or achieving financial closure) is the toughest part of infrastructure projects and one where many companies slip up.
Currently, the National Highways Authority of India (NHAI), the country’s highways regulator, permits contractors to collect user charges on four-lane highways that they are expanding to six-lane ones only after they achieve financial closure for these projects. It has awarded seven six-laning contracts since January 2007. NHAI collects user charges from the toll plazas on these four-lane highways.
Brahm Dutt, secretary, road transport ministry, said the ministry was considering doing this and said it planned “to take it to the Cabinet Committee on Economic Affairs (CCEA) soon”. Dutt declined other details. CCEA is the body that signs off on key economic decisions of the government.
The ministry’s plan is in line with the proposal made by the Planning Commission, that seeks to allow highway contractors to take control of toll collection before they achieve financial closure for projects.
The finance ministry has, however, objected to this proposal, saying it is unwise to allow companies to collect toll even before they tie up funds for projects.
A top finance ministry official, who didn’t want to be identified, said: “Once you achieve financial closure, you are stable. At least you have the money to start work.”
NHAI, according to a ministry official who declined to be identified, aims to gradually transfer almost all the toll revenue it earns from four-lane stretches—about Rs1,600 crore a year—to private firms that are awarded projects under the 6,500km-long fifth phase of the National Highway Development Programme (NHDP).
Scheduled for completion in 2012, this phase involves six-laning the entire 5,700km of the so-called Golden Quadrilateral highway network and some other stretches that have already been four-laned—covering a total of about 6,500km of highways.
“The companies will have to deposit the money (collected from toll booths) in an escrow account (which can be used only for construction purposes) and they will be monitored by independent consultants,” said Didar Singh, member (finance), NHAI. The auditing system is foolproof and there is no chance of private companies making unauthorized withdrawals from the escrow account, he added.
“The aim of our transferring toll booths to the private players is only to make the highway contracts more attractive to them,” Singh said.
An official familiar with the matter, and who was involved in early debates on the fifth phase of NHDP, shared the finance ministry’s concerns. “There has been a lot of controversy and debate over the transfer of toll booths and the way the fifth phase has been structured. How do you know whether these companies will be able to achieve financial closure in the first place?” asked this person, who did not want to be identified.
M. Murali, director general of highway contractors body National Highway Builders Federation, said: “It (the proposal) is definitely going to be an encouraging move. As far as a concessionaire is concerned, he has to provide a bank guarantee to banks. If we can show that revenue is being generated (from the existing toll plazas), then it will make it easier (to get loans for the six-laning project).”
Rahul Chandran also contributed to this story
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First Published: Thu, Jan 29 2009. 12 43 AM IST
More Topics: NHAI | Toll rights | Road transport | Contracts | CCEA |