The Hindu Business Line : Highway development programme hits a dead-end

As per the earlier system, the expanded NHAI Board was given full financial powers to appraise and award BOT road projects without reverting to the Cabinet and the entire process took 4-6 months.

Bangalore/New Delhi , Sept. 15

The Union Government's highway development programme has come to a grinding halt this fiscal.

With almost half of the fiscal year ending in a fortnight, the National Highways Authority of India (NHAI) has not been able to award a single kilometre of highway project so far under the public-private-partnership (PPP) model.

New procedure

The NHAI had set a target of awarding over 3,000 km of highway projects this fiscal under Phase II and Phase III of the National Highway Development Project. But, the highway implementation agency is unable to proceed with the bidding process because of a decision taken by the Cabinet Committee on Economic Affairs (CCEA) last year to introduce a new procedure for PPP projects in infrastructure sectors.

CCEA decision

As per the CCEA decision, the NHAI will have to route the BOT projects being implemented under the PPP model to the Public-Private-Partnership Appraisal Committee (PPP-AC) headed by the Secretary, Department of Economic Affairs in the Finance Ministry, for its approval to starting the bidding process.

The other members of the PPP-AC are the Secretary, Department of Expenditure; Secretary, Planning Commission; Secretary, Department of Legal Affairs, and the Secretary, Ministry of Road Transport & Highways. The NHAI has forwarded projects to the Union Ministry of Road Transport and Highways for onward submission to the PPP-AC Secretariat for clearances relating to various aspects of the bid documents. But, the PPP-AC is yet to meet on highways projects, officials said.

The NHAI had received technical and financial bids for some of these projects that were bid out using the earlier model concession agreement (MCA) with the approval of the CCEA.

But, even in this case, the NHAI will have to take approval from the PPP-AC before opening the technical and financial bids though it was decided that October 27, 2005 would be the cut-off date for the new panel to start functioning, consider and approve projects using the revised MCA.

New panel

Industry sources reckon that the setting up of the new panel and the revised MCA would delay the award of all future highway projects by a minimum of six months.

"This is a big set back to the highway sector", an industry official said.

"While issuing the guidelines for the functioning of the PPP-AC, the Government could have exempted those projects that were in various stages of the bidding process using the earlier MCA. This could have expedited the award of projects since the NHAI had already taken the Cabinet approval for the overall programme in the beginning of the year before starting the bidding process," he added.

As per the earlier system, the expanded NHAI Board was given full financial powers to appraise and award BOT (build, operate, transfer) road projects without reverting to the Cabinet and the entire process, which was functioning smoothly, took 4-6 months.

Under the new system, the NHAI will have to take approval from the PPP-AC on the project documents before starting the bidding process.

And, in case there are deviations from the new MCA, it would have to be cleared by the Prime Minister's Committee on Infrastructure.

Private investors have questioned the Government's decision to set up a separate body to vet projects whose members are already part of the extended NHAI Board. The new MCA envisages that 80 per cent of land has to be acquired and given to the concessionnaire within 3 months of awarding the project. NHAI will have to pay penalty to the successful bidder if there is a delay beyond three months.