The Hindu Business Line : Study favours integrated contracts for pvt investments in highways

THE roads sector would require investments to the tune of Rs 2,10,000 crore , with a significant portion to come in through the private sector, for achieving a GDP growth rate of 8 per cent by 2007, according to an independent study on the roads sector.

The report titled `Indian Roads and Highways - A smoother ride into privatisation' prepared by financial research firm Four-S Services, has called for the need to facilitate private investments into all highway and expressway projects.

The report has favoured an integrated contract model involving both construction and O&M (operations and maintenance) contracts spread over long concession periods, as against the traditional BOT (build-operate-transfer) model of public-private partnership being followed in case of the Rs 58,000-crore National Highways Development Project (NHDP).

The report, which points at the need for improving the road quality for around 80 per cent of the total paved roads in the country, has said that during the bidding process for award of projects, the bid amounts need to conform to a pre-specified range of the project cost. This has been suggested to disqualify extremely high or low bids.

The report has also suggested that the `annuity model' of public-private partnership, where the Government takes on entire the traffic risk and makes fixed semi-annual payouts to the operators over the concession period, for all `high traffic risk' stretches.

It has said the `shadow tolling' model, where the Government pays the operator on the basis of an estimate of the traffic passing through the section, for all stretches where the problem of willingness to pay is acute.

The report has said that the Government initiatives such as revenue and exchange rate guarantees for attracting private participation and participation by funding agencies is necessary.

The report has said that availability of long-terms funds is one of the major constraints and that the setting up of a private equity fund focussed on the infrastructure sector can help take care of the equity financing problems to an extent.

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Study favours integrated contracts for pvt investments in highways