TrafficInfraTech Magazine Linking People Places & Progress
What is the most important need for the infrastructure companies right now that will ease their pressure while implementing projects?
We feel there are two important concerns namely, Land Acquisition and Financing. As far as land acquisition is concerned, there is a need to expedite the process to enable the concessionaire to complete the project in time without cost overrun.
In financing, there is a need to make cheaper loans available for infrastructure projects. The major sources of funds are banks which are already close to their exposure limit and they also face Asset Liability mismatch. Insurance companies and pension funds should be allowed to lend to infrastructure companies. IIFCL refinancing, once in full force, will help us finance our projects at a better rate.
What needs to be done to have skilled labour that can implement the latest technologies because most of the time the labour is ill-equipped to meet the demands of advanced technology implementation?
Road industry is facing the constraint of skilled manpower. There needs to be a collective effort to train the potential manpower. The following are the ways the demand-supply gap can be filled:
1) The construction industry associations should professionalise the management within construction firms by introducing registration/rating/grading and performance management for employees (such as ISO 9001) and incentive schemes like employee stock options (ESOPs) to retain people in the sector.
2) The government and industry should conduct active marketing campaigns and provide opportunities for final year civil engineering students to work as interns on live road projects, to attract more fresh talent into the sector.
3) The government should formulate a policy to establish more training institutions and centres of excellence to train both unskilled and skilled workers, engineers and managers in the industry. The government should expand vocational and technical education systems to the rural areas and set up centres of excellence for specific trades.
What are the new road projects of Reliance Infrastructure? What are their USPs?
Our latest projects are Hosur Krishnagiri and Delhi Agra projects. I think we are pioneers in leveraging IT to improve connectivity to our project sites. For instance, sitting in our Mumbai office, we monitor the entire toll operations across the country – whether they are in Tamil Nadu, Karnataka, the interior regions of Maharashtra or UP.
Our ERMS – Enterprise Road Management System – is an award winning IT initiative. It will help us to evolve our national highways into what we call “Smart Roads” which have enhanced level of customer experience – like higher safety, breakdown services and traffic alerts besides providing us a good database system for forecasting our projections. The systems would also help us map the maintenance needs of our roads and monitor the environmental condition of our stretches.
We also are working towards value engineering where in we can execute our projects with high quality and incur optimum cost.
Infrastructure companies, despite being in the business of providing the basic needs to general public, are generally disliked by public for holding up their commute, creating traffic jams, etc. What can be done in this regard? Does Reliance Infra have a machinery that tries to reach out to people to create awareness on such projects?
There is a need to make the local people appreciate the benefit of the infrastructure asset being created. We have to make them appreciate that during construction there would be difficulty but finally it would lead to better connectivity and prosperity of the region. The government agencies and developers need to plan project execution in such a way that there is minimum trouble to the public at large.
For our projects, we are working on detailed environment management and safety management plans. The idea is to go beyond compliance and ensure that we add value to the environment and the local population. CSR strategy is very much part of that. In fact, this is something that our financers from abroad appreciate and encourage us to do.
What is the viability status of PPP projects – drawn from Reliance Infra’s personal experience?
Risk Sharing is the pivotal part of PPP projects. The risk sharing framework should protect the private sector. The viability of PPP projects depends on the framework. As per our experience, following are the reasons affecting the viability of a project:
- Non-availability of land and delay in procuring permits and approvals: There have been cases when the projects are delayed resulting in massive cost overrun only due to land acquisition issues.
- Quality of Detailed Project Report
- Rising cost of funds: The interest rates are increasing and along with the delay in completion, they can only add to the developer’s problems.
- Traffic Estimates: There is no sanctified traffic statistics for the purpose of bidding. Hence, traffic estimates and their growth rates are subject to change affecting the revenues and eventually, the project’s viability.
- Aggressive Bidding: In the current scenario, some of the developers are bidding aggressively to win a project. Aggressive estimates of the variables may affect the execution of the project, given the current cost of funding. In fact, these are small bidders who are looking to take up work irrespective of viability. Larger players hence, are currently not very active in bidding.
The construction industry associations should professionalise the management within construction firms by introducing registration/rating/grading and performance management for employees and incentive schemes like employee stock options to retain people in the sector.
On the whole, the PPP projects have been successful in bringing capital, capacity and much needed efficiency in the process. However, there is a need to further increase efficiency in the PPP projects to make them competitive. Developing strong domestic private sector and support of the State can help reduce the project costs arising out of a fast process.
Any other point you would like to make?
Yes, there have been cases when land has not been acquired till the date the projects were to be actually completed! There was an attractive project in Tamil Nadu that was given out for bidding. There was a lot of interest among players for a project in Tamil Nadu which was bid out but post bidding, it was communicated that the project had been put on hold due to lack of clearances.
Though we understand that the government authorities work with many constraints, such events make investment into the sector difficult and uncertain. Another fact is that authorities get project reports done prior to bidding out project. Often the reliability of such DPRs is questionable. The estimates of traffic and scope of work prior to bidding and once the project has been taken over, can change and cause difficulty in the execution and financing of the project.