NHAI plans to award 5,000-km highways contracts in 2014-15

NEW DELHI: The National Highways Authority of India (NHAI), after a dismal show in 2013-14, is readying its work plan for this financial year, one that reflects the pessimism enveloping the sector. It is planning to award about 2,000 km through cash contracts, or EPC mode, and is ready with 3,000 km to be bid via the public-private partnership (PPP) mode.

NHAI officials said they have informed the highways ministry of their targets for 2014-15 but awarding projects on the EPC mode can only take off if NHAI is able to acquire 90% of the land. In addition, the final award on PPP mode would depend on the market response, which has been poor of late, and may need to be converted to the EPC mode if no bids are received.

"We have had discussions on what target to fix and it was decided to keep a conservative estimate since we would have to answer to the new government on the results.

All in all, it might be possible to award about 5,000 km of projects, with about 3,000 km from BOT projects only if appetite of lenders improve," said an NHAI official, adding that the Authority has communicated to the highways ministry that if PPP projects have to be converted to the EPC mode, then NHAI's financial capacity would have to be examined.

NHAI chief RP Singh has told the ministry that further allocation of resources would be required in such a case and these issues would have to be presented to the new government on priority, said people familiar with the matter.

As per the work plan, NHAI is readying about 2,300 km of highway projects with a total project cost over Rs 15,000 crore via the EPC route, and 3,278 km PPP projects worth overRs 35,000 crore. The EPC projects include Rs 996 crore Talcher-Dubari-Chandikhole and Rs 675 crore Bijapur-Gulbarga-Homnabad stretches which had been bid out in 2012-13 on the PPP mode but failed to get any bidders.

"In recent months, raising equity for highways PPPs has become difficult and there are even signs of declining interest from developers.... Not only are companies hesitant to bid for new projects, several existing assets are up for sale. Many developers are finding it difficult to fund the entire shelf of projects. They are resorting to asset sale to fund new/existing projects," said Manish Sharma, Executive Director - Capital Projects & Infrastructure at PWC.