Roads & Highways:Hurdles and Solutions…

Procedural Simplification

Earlier, for projects valued between `300-500cr, the project appraisal was done by a committee headed by Secretary, Expenditure. This procedure resulted in delay in awarding projects. The Finance Ministry relaxed norms recently for both PPP and EPC Projects ? now projects up to `500cr can be appraised by a Committee headed by Secretary, MoRTH and approved by the Minister, MoRTH. This streamlined process is expected to expedite the process of award of projects

Dispute Resolution

Legal disputes and financial claims arise quite frequently out of highway contracts, with the total disputed amount being more than `10,000cr. A new dispute resolution mechanism has been set up by the NHAI Board. There is a 3-stage dispute resolution process including creation of an Independent Settlement Advisory Committee (ISAC) comprising a retired High Court judge and two other members approved by the NHAI.

EPC Contracts & OMT Contracts

With the subdued economic climate, PPPs have become difficult to execute. As a result, the Cabinet decided in 2012 to take up projects on publicly funded EPC basis. 2000km of EPC projects were targeted this year. This is expected to result in infusion of more liquidity into the sector. The Cabinet also approved contracts in the OMT mode for projects with completed construction. About 3000km length of such projects were approved in 2012-13.

Rescheduling of Concessionaire Premiums

With the economic slowdown affecting projects, concessionaires have made a request to reschedule the premiums payable by them to NHAI, keeping the NPV of such deferred payments as the same. The issue has been referred by NHAI Board to the Ministry. Since a total of more than 1 lakh crore is at stake over next 25 years, the matter has been referred to CoS. The main issue is whether signed contracts can be re?opened subsequently even at the cost of forgoing huge revenues. The Ministry has proposed to the Cabinet Committee on Economic Affairs rescheduling premiums worth `90,000cr payable by concessionaires for 23 projects. According to the premium rescheduling plan, concessionaires are expected to pay lesser premium for a few years and then subsequently increase their premium without affecting the total payment. The advice of Ministry of Law has also been sought in this regard.

Rationalisation of Total Project Cost

Difference between estimated Total Project Cost (TPC) during project approval stage and that during financial closure stage is a point of contention, particularly from the lenders? point of view. The Ministry has proposed introduction of provisions for allowing updating of TPC linked to a suitable market index. The proposal envisages using Wholesale Price Index (WPI) initially, and then a highway specific index which would capture price changes of critical construction material like steel, bitumen, cement and aggregate. A Cabinet Note has been circulated and responses have been received from concerned Ministries and Agencies

Implementation of Expressways

NHAI is creating an entity exclusively for the purpose of implementation of expressways. Each project will have customised project specific options for implementation. The projects identified for implementation and in the development stage are: Eastern Peripheral Expressway (135km), Delhi-Meerut Expressway (66km) and Mumbai-Vadodara Expressway (400km).

Regulatory Authority for the Road Sector

Government has decided to constitute a regulatory authority for the road sector. A task force has been set up by the MoRTH to expedite the process and rounds of interactive sessions /stakeholder meetings have been held including the task force meetings. The Terms of Reference (ToR), constitution mechanism and organisational structure of the Authority are under finalisation.