Spotlight – Highway to success
Highway to success
M. Murali, Director General, National Highway Builders Federation, shares his analysis of the 100-days programme of the Ministry of Road Transport & Highways and the viability of what is termed as the biggest highway development programme, in an interview with Anil Mathew
What is your assessment of the 100-day agenda for highways? How do you look at the Ministry of Road Transport & Highways’ biggest highway development programme?
The verdict for the initial 100 days may be termed as a mixed one, where success and failure have contributed equally. The success part includes the government’s initiatives to constitute a Committee under the chairmanship of Shri BK Chatuvedi, Member Planning Commission to prepare an exhaustive report on identifying the issues and problems, especially on the ‘build-operate-transfer’ (BOT) projects to suggest the remedial measures.
The suggestions of this report were subsequently approved by the Government and are under implementation. The report covers almost all problems pertaining to the road projects under BOT and will benefit the road projects.
As far as the failures are considered, what comes to the forefront is the policy makers’ failure to adopt a consumer friendly policy. The policy of restricting the bidders at the financial bidding stage has delayed most of road projects by one year and the controversial policy of Conflict of Interest caused the delay at present by more than six months. Besides time losses, these delays are, if converted into the cost increase in projects, will be a substantial amount.
Among other things, basics such as mutual trust among the partners are thumb rule for the success of any BOT projects was conveniently forgotten by the policy makers while imposing the conditions for the project.
From a contractor’s perceptive, who wants to take up a project from the National Highways Authority of India, how helpful is the Chaturvedi Report?
Although, out of all infrastructure sectors, the road sector remains more attractive, the developers/contractors are not willing to join hands with the government on its development unless the long standing issues are resolved in the right spirit.
As I mentioned earlier, one of the positive steps taken by the government to analyse these problems and resolve the issues is the appointment of the BK Chaturvedi Committee (to prepare corrective steps). The committee has prepared an exhaustive report covering almost all the problems pertaining to the road sector under BOT.
Major suggestions in the report include:
• Present share holding limit of more than 5% of a common investor in more than one bidder who are bidding for the same project invites forfeiture of bid deposit due to conflict of interest clause. This 5% limit is now raised to 25%
• The forfeiture of security deposit on non participating in bids be limited to 5%
• Deletion of termination clause
• The lead concessionaire will be allowed to exist from the contract once the construction is complete, so that the concessionaire can use his resource and expertise in future projects
• Classifying the loans to road sector from unsecured to secured loans
The said report is currently at the implementation stage and will definitely help the road sector in the years to come.
What’s your take on the proposed Road Finance Corporation?
The proposed Road Finance Corporation would definitely be a step forward in the road projects provided the rules and regulations of these institutions may be laid out with the consent of the all stake holders working in the road projects. Otherwise you are creating a hurdle in the finances of road projects.
It is learnt that a separate authority will be constituted soon for expediting development of expressways. How do you see this move?
The issue of constructing the Expressways are different from Highways in terms of technology, finances and operation part. It will be appropriate to have a separate authority for the Expressways.
Do you think the target of 7,000 km every year is achievable in India in the coming years? If yes, what makes you think so? If not, why?
The target of 7000 km /year is an achievable target in the coming years provided that a consumer friendly policy approach may be adopted by the government. The contractors / concessionaires presently working in the road projects are capable enough to achieve the targets aimed by the government by supporting in speedy clearance of the issues arises like land acquisition, proper cost escalation and easy term finances. Also, speedy decision making will provide the necessary impetus for achieving the target.
How do you look at the Hon’ Minister’s move to attract foreign investment? Why? How far, do you think, it would yield fruit?
The move of our Hon’ Minister to attract foreign investment in the road sector is a right one. The foreign investment depends upon the long term consistent policy which will secure their investment and returns. Unless the government takes appropriate policy support by which a definite return on investment to domestic contractors/ concessionaires is made sure, it will be difficult to attract investors from abroad. The foreign investors, irrespective of their origin, will normally take cautious approach on their investment. They will compare the past experience in that particular sector they are investing.
Instead of 20 km a day and other measures detailed by the ministry, would you suggest a more practical approach to develop roads in the country?
The more practical approach will be instead of targeting the 20 km initially we can start with 10 or 12 km and subsequently meet the target. Normally the delays in the projects are due to land acquisitions which are basically a ‘state’ subject. The lack of long term policy and lack of understanding of the operation of the BOT are also hindrances to achieve the target.
You’ve said lack of understanding of the operation of the BOT is one of the hindrances to achieve the target. What do you think should be done to create understanding on the operation of the BOT?
In this context, the top priority of the sector should be to lay down a consistent uniform policy on land acquisition and clearances with the help of inter-governmental collaboration.
Secondly, stress should be given to the development of model concession agreement (MCA) in which the suggestions of the stake holders are incorporated, which in turn should be endorsed by concessionaire, bankers and consumers for the successful implementation of the road development programmes.
Thirdly, the guarantee on the return on investment will attract more concessionaires into this sector. Finally there is a need to develop mutual trust, co-operation and support among the concessionaires and government.
Do you think capacity building of consultants, contractors and the National Highways Authority of India is an easy task? Why?
The contractors / concessionaires working on the road sector are consistently increasing their capacities and upgrading and adopting with latest technologies prevailing in the world. Simultaneously the contractors /concessionaires working with the state projects may be attracted to the main stream for replicating their achievements.
With their long experience, the operators presently working in the road sectors understand the ground realities of their area of working and problems that may arise during the construction will make them as best players available.