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Business News/ Opinion / Moving it along
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Moving it along

The next phase of NHDP must focus on full transparency, ongoing maintenance, clean toilets and service facilities

Photo: Indranil Bhoumik/MintPremium
Photo: Indranil Bhoumik/Mint

A few times a year I am required to be in Kolhapur in Maharashtra. The smartest way to get there from Bengaluru is to fly to Belgaum and then drive. This 110km section of the picturesque National Highway 4 (NH4) is superbly paved and can be covered in a mere 75 minutes. NH4 is the Mumbai-Chennai link of the Golden Quadrilateral (GQ), a major road programme connecting the leading industrial, agricultural and cultural centres of India. The GQ programme, which began under Atal Bihari Vajpayee’s National Democratic Alliance (NDA) government in 1999, is now complete and is the largest highway project in India and the fifth longest in the world. It consists of nearly 6,000km of four/six-lane express highways built at a cost of 60,000 crore. The GQ programme has been extended to include the North-South corridor from Srinagar to Kanyakumari and the East-West corridor from Silchar to Porbandar.

At 4.2 million km, India and China are tied second in terms of road network length, behind the US. According to the National Highways Authority of India (NHAI), national highways make up about 2% of the network but account for 40% of road traffic, 65% of India’s freight and 80% of passenger traffic. The NHAI is the autonomous agency of the government of India charged with the management of nearly 80,000km of national highways and the phased implementation of the National Highways Development Project (NHDP). NHDP was conceived in a seven-phase plan to upgrade India’s roads to “international standards with facilities for uninterrupted traffic flow". The NHAI website has detailed maps and project status reports.

Expected to be completed this year, a careful estimate suggests about 75% of NHDP has been completed.

Highway projects in India are funded by NHAI, with substantial contribution coming from the Central Road Fund (CRF). CRF was initially funded only by a road cess, first established in 2000. In the 2015-16 budget, the blended new road cess of 6 is supplemented by a significant contribution from excise duty of approximately 12 per litre from petrol and 5 per litre from diesel. The plan allocation of 43,000 crore to roads for this year has been raised nearly 50% from last year. In turn, NHAI leverages this contribution in the marketplace and issues (54 EC, non-taxable) capital gains bonds that add to its funding flexibility. The 2015-16 series of this bond has a mandate to raise 4,000 crore at a tax free rate of 6% per annum.

Money is not, by itself, the major bottleneck. Despite this direct funding from CRF and from the market, and a stated goal of 20km per day of road construction, implementation has remained at less than 11km per day for several years, including during this first year under the current NDA government.

Nitin Gadkari, minister for road transport and highways, recently increased the goal to 30km per day. In an attempt to get a move on, Gadkari has added a “hybrid-annuity" model to the existing set of options available. In this new model, traffic risk and the political risk of collecting tolls will be shared to a significant extent with government. Under this model, the developer needs to contribute only 60% of the development cost with the remaining funded by government. The government collects the toll and pays the developer a (biannual) annuity. With this, Gadkari is hoping to kickstart private sector interest by addressing hurdles faced by the private sector such as inaccurate revenue assessment, delay in clearances, poor dispute resolution mechanism and access to financing.

Kolhapur and other towns have seen violence at toll-booths in recent years. These anti-toll protests have so far not spread beyond Maharashtra. The Bharatiya Janata Party-Shiv Sena alliance came to power in the state last year partly on the promise of a “toll free" state. Much of the frustration comes from non-transparent financial information for state and district highways and inadequate and sub-standard services on some of these toll roads. Rather than tackle the transparency and solve the service issue, the political conflict has directly focused on the abolition of tolls. This is a lose-lose situation.

The next phase of NHDP implementation must focus on what the protests are about: full transparency, ongoing maintenance, clean toilets and service facilities, emergency cranes, ambulance service, parking bays and lorry lay-bys. On the construction side, many of the projects are stuck on clearances that take an indefinite amount of time. The hybrid-annuity mechanism is a clever variation to attract the private sector but all models should continue.

Fifteen years on, Vajpayee’s vision for Indian roads has been transformative in its impact. After years of dithering from the United Progressive Alliance government, Gadkari and team have a golden opportunity to extend Vajpayee’s dream and dramatically increase the footprint, quality and services on Indian roads. They must get a move on.

P.S. “There are only two mistakes that one can make on the road to truth; not going all the way, and not starting," said Gautama Buddha.

Narayan Ramachandran is chairman, InKlude Labs.

Comments are welcome at narayan@livemint.com.

To read Narayan Ramachandran’s previous columns, go to www.livemint.com/avisiblehand-

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Published: 28 Jun 2015, 08:41 PM IST
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