Govt audit finds Rs384 crore wasted on 8 highway projects

Govt audit finds Rs384 crore wasted on 8 highway projects
Comment E-mail Print Share
First Published: Fri, Dec 12 2008. 11 01 PM IST

Vital link: A stretch of the Delhi-Gurgaon highway. The audit says 20-year concessions given to developers of this stretch led to losses. Ramesh Pathania / Mint
Vital link: A stretch of the Delhi-Gurgaon highway. The audit says 20-year concessions given to developers of this stretch led to losses. Ramesh Pathania / Mint
Updated: Fri, Dec 12 2008. 11 01 PM IST
New Delhi: The first-ever audit of public-private partnerships, or PPPs, conducted in eight highway projects has found that some Rs384 crore of Indian taxpayer’s money was lost due to various inadequacies.
Vital link: A stretch of the Delhi-Gurgaon highway. The audit says 20-year concessions given to developers of this stretch led to losses. Ramesh Pathania / Mint
The Comptroller and Auditor General, or CAG, said the loss was caused by revenue leaks, non-levy of penalties to highways contractors, among other reasons.
PPPs are seen as the preferred means of financing infrastructure projects as government budgetary resources grow increasingly stretched.
CAG, the government’s external auditor, reviewed eight of 17 highway stretches awarded to private concessionaries under the first phase of the National Highway Development Programme, or NHDP; four of them were tendered under the toll model and the rest under the annuity model. All these eight highway projects were awarded between 1998 and 2003.
In the toll model, companies derive their revenues by levying toll for a specified concession period whereas in the annuity system the developer recovers his investments from the government.
“Generally, there was more exigency in BOT toll projects but in annuity projects, there was delay at every level,” said K.P. Sasidharan, principal director, CAG.
BOT refers to the financing model in which the developer finances, builds and operates a highway for a specified period of time and derives revenues from it.
Under the first phase of NHDP, highways regulator National Highways Authority of India, or Nhai, was mandated to upgrade some 6,300km of highways at an estimated cost of Rs30,300 crore.
Of these, 17 stretches were awarded under the BOT model between March 1998 and April 2003. However, only five of the 17 were completed within the scheduled time, the audit added.
The audit, which was presented in the Rajya Sabha (upper house of Parliament) on Friday, revealed that Nhai did not conduct detailed project reports (DPRs) while tendering highway stretches between Satara and Kagal in Maharashtra and Jaipur and Kishangarh in Rajasthan.
Some analysts, however, said DPRs shouldn’t be prepared for BOT projects.
“If we have DPRs, then you are not allowing for innovative engineering. You are only allowing for financing play through either cheaper cost of funds or more aggressive traffic estimates,” said Parvesh Minocha of consultant Feedback Ventures Pvt Ltd.
Nhai also did not have a system to compute “a reasonable concession period” in the two highway stretches between Delhi and Gurgaon and Jaipur and Kishangarh.
The report said that allowing for a 20% rate of return, the two road stretches should have been tendered for 14 and 12 years, respectively, as opposed to the 20-year concessions given to developers, leading to combined losses of Rs309 crore.
The Delhi-Gurgaon stretch is operated by a consortium headed by DS Constructions Ltd while the Satara Kagal stretch was built by the Maharashtra State Road Development Corporation Ltd.
The Jaipur-Kishangarh highway stretch is operated by a consortium headed by the GVK Group.
Comment E-mail Print Share
First Published: Fri, Dec 12 2008. 11 01 PM IST
More Topics: Highway Projects | Government | Audit | CAG | Delhi |