Extensive reforms in roads a must: Deepak Parekh

MUMBAI: HDFC Bank chairman Deepak Parekh has called for extensive reforms in the road sector, including setting up of an independent regulator and removal of ceiling on returns for the private sector investment in highway projects.

Speaking at an IDFC Investor Conference on Monday, Mr Parekh, who is also the chairman of IDFC, said: “Institutional reform of National Highway Authority of India is essential to make it more effective, and enhance its capacity to undertake the public-private partnership projects. Some of the measures that may be considered are appointment of independent directors, decentralisation of operations by devolving more powers to regional offices, and strengthening its internal cadre.” Describing the present pace of road-building in India as ‘anaemic’, Mr Parekh said significant time delays occur in the bidding process.

India has one of the world’s largest highway development programmes to be implemented on a PPP basis. Under the National Highway Development Project, the government has taken up the target of constructing more than 54,000 km of highways. At present, around 20% of the target has been completed at the rate of 3 kms a day. The other four-fifth is targeted for completion in the next five years at the rate of 20 kms per day or about 7,000 kms a year.

“Achieving such ambitious targets against the anaemic pace of highway development over the past 2-3 years will entail eliminating major constraints to PPP in roads. One of the primary reasons for the slowdown was the premature attempt to control the private sector returns on road investment by capping the upside revenue potential due to higher-than-projected actual traffic,” he said.

“Going forward, this programme would rely heavily on the private sector funding. Combine this with the fact that there is a proven track record of public-private partnership in the roads sector through the toll and the annuity model, and it becomes very clear that the roads sector provides tremendous opportunities that no can afford to miss - may he be a contractor, a banker, or an investor,” said Mr Parekh.