Centre relaxes norms to speed up highway projects

NEW DELHI: The government on Thursday made it easier for builders to execute highway projects by relaxing the norms for public-private partnerships in the road sector. The move is expected to speed up road development and create jobs for the poor.

The Cabinet Committee on Economic Affairs (CCEA) has approved the recommendations of the BK Chaturvedi panel on highway development, a person privy to the development said.

The committee has granted permission to relax the restrictions on cross-holding between developers bidding for a project by raising the limit to 25% from the current 5%. The committee also allowed the merger of the two components of viability gap funding (VGF) ��� equity grant and fund released by the government through the construction period, the person said.

Now VGF is given in two stages each worth 20% of the project cost. The government has also allowed developers to exit from projects once construction work is complete. This allows a developer to sell the project to another one, who would be responsible for managing the road project and collecting revenue.

The changes in cross-holding norm will allow a developer to bid for more than one project. The clause earlier barred partners of a special purpose vehicle (SPV) from bidding for a project in case of a common shareholder with higher than 5% ownership through direct or indirect holding.

The move would speed up the pace of highway development in the country with more investors coming in. The government has set a target of constructing 7,000 km of road annually or 20 km a day. It is planning to award contracts for nearly 12,000 km of highways in the next one year to private developers.

The government has also cleared a proposal of the Chaturvedi Committee to set up an empowered group of ministers (EGoM) to make necessary changes in the model concession agreement (MCA) in case an inter-ministerial panel fails to resolve an issue related to highway project.

Members of the proposed EGoM would include Planning Commission deputy chairman Montek Singh Ahluwalia, finance minister Pranab Mukherjee and road transport and highways minister Kamal Nath, an official said.

The Prime Minister's Office (PMO) had formed the committee under the chairmanship of Planning commission member BK Chaturvedi to suggest measures to expedite the flagship National Highway Development Programme (NHDP). As per the new norms, a developer once qualified for a road project (technically called the request for qualification), will not be required to go through the same process again for future projects. The move would save time.