The Hindu Business Line : 2008: Many a roadblock in highways

And the Ministry of Road Transport and Highways is yet to frame the rules under the Carriage by Road Act, a law that envisages widespread reforms in the extremely unorganised commercial transport sector.

NH PROJECTS

In the first half of 2008, the number of companies eyeing the highways sector was so high that highway developers moved the Delhi High Court challenging a Government norm that suggested limiting the number of bidders at the financial bidding stage.

By the last quarter of 2008, however, high input costs and credit squeeze had taken its toll on the developers and the NHAI had difficulty finding bidders for the same national highway projects.

Incidentally, the Finance Ministry also deleted the contentious ‘competition-limiting clause’ (a clause which the Planning Commission was batting for) with prospective effect by September last week. But by that time, developers had started withdrawing their bids.

In the last ten days of 2008, the developers appear to be taking some interest after NHAI took steps that make the projects attractive.

Contrasting scene

However, despite these steps, for about six projects, NHAI has been able to attract an average of three-four bids at the financial bid level.

This is in sharp contrast to the rush seen for projects in the initial part of the year when the number of bidders (at the qualification level) was in the range of 16-26.

The steps taken to make the projects financially attractive include the new toll policy which allows developers to start tolling from the date specified in the contract.

Viability gap funding

The Government also indirectly increased the absolute amount that concessionaires could claim as viability gap funding (VGF). Developers can claim a maximum of 40 per cent of project cost as VGF and the Government (through a Cabinet decision) decided to increase the project costs by 10 or 20 per cent.

Moreover, highway developers are waiting for the details of the Government announcement allowing India Infrastructure Finance Company Ltd to raise funds by issuing tax-free bonds to support a public-private partnership programme of Rs 1,00,000 crore in the highways sector. The announcement does not spell out the exact details of the nature of benefits that will accrue to developers.

CARRIAGE BY ROAD ACT

The long-awaited reforms in the commercial road transport sector continue to be delayed with the Road Ministry yet to frame the rules under the Carriage by Road Act.

The Carriage by Road Act calls for registration of all parties involved in the supply chain of goods transportation on road, apart from a single registration regime.

The Road Transport Ministry was supposed to finalise the rules by mid-2008.

The reforms include single registration by all players in the industry, mandatory goods forwarding notes between the customers and transporters, amongst others.

Liability

The Act broadly states that the liability on the common carrier in case of loss of goods would be defined — without specifying a limit.

In 2007, the Road Ministry had formed a committee asking it to finalise forms, returns and determine fee under various provisions of the Act.

The Carriage by Road Act, which has received Presidential assent, is yet to be notified for implementation because specific rules for broad guidelines under the Act are yet to be framed by the Ministry.