Govt weighs whether to auction or award road projects to ADIA2 min read . Updated: 20 Feb 2017, 02:31 AM IST
While roads ministry wants to auction projects, ADIA is keen on government-to-government route
New Delhi: The government is contemplating whether to award operational highway projects to the Abu Dhabi Investment Authority (ADIA) in a government-to-government (G2G) deal or to auction them.
The ministry of road transport and highways wants to auction the road projects identified under the Toll Operate Transfer (TOT) model, aimed to monetize India’s public funded national highways. Under the TOT model, National Highways Authority of India (NHAI) plans to lease as many as 75 national highway projects, which are operational and have been generating toll revenues for at least two years.
“The road ministry along with NHAI have already given their comments for a concessionaire agreement," said a government official, requesting anonymity.
ADIA is the sovereign wealth fund of Abu Dhabi. G2G deals are struck to reduce the prolonged transaction process, a case in point being India’s decision to buy Rafale fighter jets off-the-shelf from French manufacturer Dassault Aviation SA.
“ADIA is very keen on a G2G deal for TOT projects. As per the negotiations, ADIA may get the project but the agreement that is to be signed will be a critical thing. Tomorrow, for example, if the road is to be augmented from four-lane to six-lane who will do it, who will bear the expenses, what will be ADIA’s rights and obligations? They agree to do maintenance but in case of major repairs who will bear the expenses? All these things need to be sorted out before going ahead with any such G2G deals," the official added.
Under the TOT model, the right of collection of user fee or toll in respect of selected operational NH stretches constructed through public funding is proposed to be assigned for a specific time period to developers and investors against upfront payment of a lump-sum amount to the government. Further, during the tenure of the contract, the operation and maintenance responsibility would remain with the assigned developer.
Nitin Gadkari, minister for road transport and highways, favours the auction route. “Such an interest was expressed but we would prefer a tendering process to keep transparency," Gadkari said, declining to elaborate further.
The Economic Times in February last year reported about ADIA expressing interest in taking up 50 highway projects on TOT basis.
“ADIA wants the projects to be awarded under a G2G deal on a negotiated basis," said a government official aware of the development, requesting anonymity.
This comes in the backdrop of the government stepping up its engagement with the energy-rich nation. India hosted Abu Dhabi Crown Prince Mohammed bin Zayed Al Nahyan as the chief guest at its 68th Republic Day annual parade. India and the United Arab Emirates signed as many as 14 bilateral agreements to deepen economic and strategic cooperation.
“Awarding projects through the negotiated route is an option provided it follows the principle of transparency and the route is used to discover the right price. Also, G2G negotiations are qualitatively on a better footing," said Vishwas Udgirkar, partner at Deloitte Touche Tohmatsu India LLP.
While an ADIA spokesperson declined to comment, queries emailed to India’s ministries of roads and surface transport, external affairs and NHAI on 27 January remained unanswered.
ADIA and other investors such as Ontario Teachers’ Pension Plan had earlier evinced interest in brownfield road assets. In 2015, the UAE agreed to invest as much as $75 billion in infrastructure projects in the country during a visit by Prime Minister Narendra Modi in August. However, the pact aiming to put together the administrative structure for the management of funds from the ADIA and India’s National Investment and Infrastructure Fund is yet to materialize.