National Highways Authority of India to ensure contractors don’t take exit route

NEW DELHI: With two top infrastructure developers walking out of large road contracts in January , the National Highways Authority of India (NHAI) has begun working overtime to ensure that other developers don’t follow suit, leaving a spectre of abandoned and incomplete highway projects across the country.

Representatives of three large infrastructure firms, speaking on conditions of anonymity, told ET that in the past two weeks, the NHAI has reached out to them on an informal basis to check if ‘all is well’ and ascertain the extent and gravity of the problems they face. “The NHAI wants to ensure that such a situation — where builders walk away from contracts — doesn’t recur in any other project,” said the operations head of a road developer.

“The authority’s chairman RP Singh has been encouraging builders not to abandon projects and complete the contract ,” he added. In early January, GMR Infrastructure walked out of the Rs 7,200-crore Kishangarh-Udaipur-Ahmedabad road project, for which it had bid to pay NHAI an annual premium of Rs 636 crore.

Subsequently, GVK Infrastructure turned its back on the Rs 3,200-crore Shivpuri-Dewas project it had won in January 2012. Both companies had cited issues around environment clearances as their reason for pulling out. Top officials at the highway building authority are assuring developers of more pro-active action to tackle their projects stalled due to various reasons such as pending land acquisitions and environmental clearances, inability to achieve financial closure and unsettled cost escalations that have blocked over Rs 15,000 crore of industry capital. NHAI has told infrastructure firms that specific concerns cited by developers like GVK will be resolved, now that the environment and forests ministry has taken an ‘in-principle decision’ to delink the issue of environment clearances from forest clearances.

The highways authority had bid out a record 6,491 kilometres of road projects in 2011-12 but the Reserve Bank of India’s latest macro-economic review notes that most of those projects have got stuck over land and environmental clearances and developers are ‘finding it difficult to achieve financial closure’ .

“While the going was good and NHAI’s development projects were receiving aggressive bids from builders, expediting red-tape hurdles was not a key concern for the authority ,” said the chief financial officer of the infrastructure arm of one of India’s biggest corporate groups. “Now that the bids have dried up and banks have stopped lending to projects without 100% clearances, an earnest effort has begun to ensure tardy clearances don’t hold up projects,” he said.