Govt doubles funding for PPP highway projects

NEW DELHI: In a bid to attract private developers for six-laning of the ambitious golden quadrilateral (GQ) highways project through public-private partnership, the government has decided to double the grant given to the developer.

The viability gap funding for the low-traffic stretches of the fifth phase of the national highway development programme (NHDP) has been hiked to 20% from 10% while that for others from 5% to 10%, an official in the ministry of road transport and highways told ET.

The viability gap funding or VGF is a grant given by the government to private project developers in order to make PPP project commercially viable for the developer. Essentially, a part of the cost is met by the government, while the entire returns accrue to the developer during the agreed period.

���Very few six-laning projects have so far been awarded under NHDP-phase-V. An increase in grant would help to expedite the highway development,��� the offical said. The changes would soon be notified by the ministry.
The government has relaxed several bidding norms including exit clause for highway projects. It has targeted to build 7,000 kms of roads every year or 20 kms a day. The road transport ministry has planned to award contracts for 12,000 kms of roads during the current financial year.

National Highways Authority of India (NHAI), the apex road development agency, has planned to six-lane 6,500 kms of GQ and other high density corridors by 2012 under NHDP-V. It has already awarded five projects with a length of about 900 kms to private developers. ���The cabinet has already approved the proposal to increase VGF for six-laning of highways. It would shortly be made part of the bid document,��� the official said.

The road transport ministry had targeted to six-lane 17 kms a day during June-August period but it could develop only 5 kms a day. ���The move to increase VGF up to 20% would certainly help the government attract more private investment in the sector,��� Feedback Ventures chairman Vinayak Chatterjee said.

Road sector in the country would require an investment of $80 billion in the next 3-4 years of which $45 billion is anticipated from the private sector.