Planning Commission objects to proposed independent roads regulator

NEW DELHI: The Planning Commission has raised objections to a proposal to set up an independent regulator for the roads sector, one of the important reforms finance minister P Chidambaram promised in the remaining tenure of the UPA government when he toured the world to attract investment.


Interestingly, the plan panel had backed setting up a roads regulator in its 12th Plan document that was approved only a few months back, but now feels that it would not serve any purpose. “No country in the world has a regulator...In case of roads, everything is decided in the contract itself, and be it the toll rates, other tariff. So, what do we need a regulator for,” a senior official of Planning Commission told ET.

Prime minister is the de facto head of the planning commission, but it is run by a deputy chairman, currently Montek Singh Ahluwalia.

The commission has made its reservations known to the Highway ministry that had in March this year proposed that the road regulator would deal with issues including tariff setting, toll policy and modifications, compliance of service levels (for commuters), address public concerns.

The ministry had said the regulator would also be involved in renegotiation of contracts and monitoring financial health of projects and companies, an issue that has become urgent after a number of developers walked away from projects awarded to them.

“If the role of regulator is only dispute resolution, then the country needs adjudication for that and not a regulator,” the official quoted earlier said, adding that the commission has already pointed this out to the officials of the National Highway Authority of India in several rounds of meetings. Highway projects are increasingly being executed in public-privatepartnership mode in which both the sector regulators, highways ministry and NHAI, are signatories to contracts, which can give rise to potential conflict of interest. An independent regulator was expected to help develop sector and ensure fair play, but the commission feels a good contract and sound legal process can address concerns of the sector.

In the first few months of 2013, GMR and GVK had backed out of contracts with the National Highways Authority of India (NHAI) they had won earlier, citing delays in approvals that in turn have led to major cost escalations. In the last financial year the NHAI has not received a single bid for building highways in the PPP mode.

Many projects awarded in 2011-12 and 2010-11 on this basis have yet to take off. In 2012-13, the UPA government could award only 24% of its target of 9,500km of road projects. Independent experts are baffled by the about turn by the Commission.

“Setting up of a road regulator will certainly give little bit of maturity to the sector in the long-run but it would not be easy for the government to accommodate the existing road contracts, many of which are facing cost overrun, toll collection and other issues, under the regulator,” Abhaya Agarwal, head (infrastructure), Ernst &Young said.

“There is no independent regulatory authority for country's roads and highways sector-...Therefore, there is a need for a regulator whose key functions should include tariff setting, regulation of service quality, assessment of concessionaire claims, collection and dissemination of sector information, service-level benchmarks and monitoring compliance of concession agreements,” the Plan document had said.