Government likely to award road projects worth Rs 60,000 crore

MUMBAI: India is likely to award road projects worth Rs 60,000 crore in the last quarter of the fiscal to March, providing much-needed relief to infrastructure companies that have been struggling with dwindling order books and muted cash flows amid the lull in government contracts for almost three years.

The government is likely to award projects totalling 8,000 km primarily as EPC (engineering, procurement and construction) contracts, officials said. These cash contracts promise a shot in the arm for infrastructure companies, most of which have underutilised or idle labour and equipment."Large EPC projects are coming up for bidding in January-March and we hope to bag some of them. But there will be some aggression in bidding for these projects because people have not got large jobs in two years and they want these to utilise capacity," said Satish Parakh, managing director of Ashoka Buildcon.

The contractors that had forayed into project development are now looking at beefing up their EPC orders book. Most infrastructure companies have highly leveraged balance sheets and do not have appetite to take on any more projects under the BOT (build-operate-transfer) model as they don’t want to increase the debt obligation.

Of the orders being tendered as EPC contracts by the National Highways Authority of India, six-eight were to be bid out as BOT projects earlier but the government decided to award them as cash projects in view of the reluctance of the developers to take up these projects.

"The government is trying to make cement and other raw materials available at discounted rates for these projects to reduce the billing and help these companies manage liquidity better," said Vinayak Chatterjee, chairman of infrastructure consultancy Feedback Infra. "Infrastructure companies will want to take up orders to improve utilisation of machine and labour but they should be careful that they don’t erode margins while bidding aggressively," he added.

The ministry of road transport and highways is in the process of tying up with cement makers and steel manufacturers to ensure supplies for concrete road projects for the next one year. In a recent report, rating agency Crisil noted that an unprecedented pick-up in execution amid a proactive government and faster approvals by implementing agencies is visible among road projects as work on almost 75 per cent of the ones awarded in 2013-14 has started compared with just 18 per cent in the year-ago period.

"If the government swiftly implements the measures already announced and continues with efforts to further streamline approvals, we expect average delays to come down to less than six months over a period of time," said Prasad Koparkar, senior director, Crisil Research.