The government needs to tighten its qualification criteria in the awarding of tenders for road projects as companies who put in bids often complain of cost overruns, which results in the projects getting delayed, according to Virendra Mhaiskar, Managing Director of IRB Infrastructure Developers.

With an order book size of about ₹20,000 crore and around ₹6,000 crore worth of projects to be executed over the next 5-6 months, IRB Infrastructure Developers is a leading player in the road project segment.

Road projects, most delayed

Talking to businessline, Mhaiskar said that the bid price for some of the projects on hybrid annuity model (HAM) were ‘intriguing’.

“We are unable to clearly identify how somebody is able to bid so aggressively,” he said. Companies usually put in a bid for a project at a certain price “and then later on that project gets delayed due to cost overruns.” This phenomenon has been gathering pace in recent months, he added. At an analyst call last month the management of the company had indicated that it would be cautious while bidding for projects awarded by the National Highways Authority of India.

Recently a report quoting data from the Ministry of Statistics and Programme Implementation said that of the total infrastructure projects in the country, roads and highways had the highest number of delayed projects at 460 of the 750 projects under execution. These are projects costing ₹150 crore and above. Compared to the original sanctioned cost of ₹4.1 lakh crore, there has been cost escalation of 4.5 per cent.

“It would be interesting to dig more and find out the exact reasons for the delay and how much cost escalation has been experienced,” with respect to each project, Mhaiskar said. He added that since this was consistently happening there was a need for all stakeholders to come together and discuss it. “This is a real problem and so maybe there is a need to tighten the qualification criteria,” he said.

Bharatmala project

As an example he pointed to phase one of Bharatmala project which was to be completed by 2022 at a cost of ₹5 lakh crore. The completion date has now been shifted to 2027 and the cost has doubled. “That is a very mind boggling number,” Mhaiskar said.

While part of the reason was the delay due to COVID-19, Mhaiskar said there was a need to look at other factors too and check whether the bidders offered ‘very, very competing prices’ and if that was one of the reasons for the cost overrun.

Tightening the qualification criteria would ensure that quality players were in the business. “I understand and agree that we need to expand the contractor base ..but at the same time the overall commercial sense also has to prevail.”

IRB Infrastructure also recently received the appointed date for the Ganga Expressway project which is being built at a cost of ₹6,660 crore on a build, operate, transfer basis. It also got an order worth over ₹2,100 crore for a road project in Gujarat.