The road forward

A recent ‘white paper’ on the national highways by the Centre has a succinct analysis of all that went wrong with India’s road sector development in the last five years or so. The awarding of national highway projects rose from a mere 1,872 km to an all-time-high of 7,283 km between 2008-09 and 2011-12. But as the white paper notes, this was largely a “numbers game”. Projects were bid out even when land was not acquired and without obtaining various statutory approvals. Worse, there was little inter-departmental coordination. The environment ministry was tardy with granting environment and forest clearances. There were similar delays in transfer of land belonging to the defence establishment and in getting the railways to allow construction of road over-/under-bridges across existing tracks. And with the Department of Financial Services instructing State-owned banks not to lend unless land acquisition was 100 per cent complete and developers had invested the entire equity upfront, most projects failed to get off the ground.

True, the blame for this state of affairs also lies with the developers who bid aggressively — even quoting huge premiums to bag build-operate-transfer (BOT) concessions by making over-optimistic traffic and toll revenue projections. But that still does not justify the sheer lack of preparedness in the awarding of contracts. Statutory clearances not coming through provided just the alibi for developers to wriggle out of projects and issue notices to the National Highways Authority of India (NHAI) for terminating their concession agreements. The end-result was that as project execution suffered slippages, developers defaulted on debt service obligations and struggled to meet even existing equity commitments. With bankers, too, going slow on lending to the sector, the award of fresh national highway projects slumped to 2,000-2,500 km in the last two years.

The way ahead clearly is to not award any new project until all regulatory approvals have been obtained alongside the necessary land acquisition. This will avoid post-bid delays and litigations and also revive interest among developers, even if they don't bid as aggressively as before. Besides, it is necessary to restore the NHAI’s functional autonomy, which was undermined by the previous regime that created a separate inter-ministerial Public Private Partnership (PPP) Approval Committee to clear individual projects before invitation of bids. The NHAI was constituted through an Act of Parliament for developing our national highways. There is no reason why project-specific approvals — including whether these should be executed on a PPP/BOT or direct funding/EPC (engineering, procurement, construction) basis — cannot be left entirely to such a body, which has the required domain knowledge. Such empowerment must, of course, come with setting of clear targets and accountability, including to Parliament. This system is definitely superior to having intermediate layers of approval committees and ‘empowered’ groups of ministers: While being accountable to nobody, they are responsible for the delays that have killed many a project.

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