With the Ministry of Road
Transport and Highways
setting a target to award
projects measuring
8,800 km in length during the current
financial year, highway
developers are hoping that the
impact of the prevailing economic
downturn on the road sector
would be minimal.
In 2011-12, the Ministry of Road
Transport and Highways had
awarded a total of 62 projects
measuring 7,957 km in length. Of
these, 49 projects measuring
6,491 km in length were awarded
by the National Highways
Authority of India while the other
13 projects comprising 1,466 km
were awarded through state
agencies. The total project cost of
these projects stood at
68,000
crore.
Out of the projects awarded by
the NHAI during the last financial
year, as many as 32 fetched premium.
The total premium offered by
developers was
3,000 crore. In
case of the projects awarded
through state agencies, the premium
totalled
38 crore for five projects.
Considering that premium is
payable yearly, increasing 5 per
cent annually, the net present
value of the total premium offered
by developers is about
30,400
crore.
According to sources in the road
sector, a small number of developers
who had indulged in aggressive
bidding to win projects during
the last financial year are
presently experiencing difficulties
in achieving financial closure
because of the economic downturn.
However, considering that
such cases of aggressive bidding
are miniscule, no major impact is
expected on the performance of
the sector. The National Highways
Builders Federation, a representative
body of highway developers
in the country, claims that
the road sector is faring far better
than other sectors, even during
these times of economic stress.
"Till now, the economic slowdown
has not had any adverse
impact on the road sector," M.
Murali, Director General, NHBF,
told Projectmonitor.
"In any case, the prevailing economic
condition is not expected to
last for more than a year. Even
under the present economic condition,
developers are not facing
any major hurdle in raising funds
through the private equity route.
The External Commercial Borrowing
route is also available.
Besides, with the road sector
being one of the few performing
sectors, banks too have no problems
in extending loans to developers.
After all, financial institutions
also have targets to meet.
They cannot keep their money
idle," he added.
Murali admitted that the small
number of developers who had
indulged in reckless bidding to
acquire projects during the last
financial year could face difficulties
in achieving financial closure
in the current economic scenario.
"Where projects had been won
through aggressive bidding,
banks may increase the rate of
interest or seek additional security
from developers while extending
loan. A bid can be considered
aggressive only if the difference
between the L1 and the L2 bid is
more than 10 per cent. In case of
the projects awarded by NHAI
during the last financial year,
there were very few cases of
aggressive bidding," he said.
Murali pointed out that though
developers were confident of tiding
over the economic slowdown,
concerns existed over the high
rate of interest and the fall in the
GDP growth.
"The rate of interest charged by
banks has gone up to 14.5 per
cent. If a developer had placed his
bid anticipating a 10 per cent rate
of interest, the increase in the
interest rate would definitely be a
cause for worry. Developers are
also concerned over the GDP
growth fall as it would impact their
toll collection. Some developers
who signed the concession agreement
may seek extension of the
financial closure date in the anticipation
that the interest rate would
come down," he said.
Untitled Document
Delhi, Chennai to
get aviation hubs
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To turn India into an aviation
hub by expanding
regional and international
connectivity, a high level
meeting on infrastructure
chaired by Prime Minister
Manmohan Singh decided to
operationalise airline hubs at
Delhi and Chennai by the next
fiscal. An airline policy would
be finalised in this regard.
The policy has been formulated
because of fear of loss of
outbound air traffic from India
to adjoining airports such as
Dubai and Singapore. Under
the policy, steps are entailed
which include improvement of
connectivity and making visa
processing easier.
Meanwhile Airports Authority
of India plans to focus on
tier-II and tier-III cities with an
investment of 67,500 crore
to build 400 airports over the
next two decades.
Currently, AAI has about
450 airports of which 84 are
operational. Of this, about 125
airports are with the AAI, while
30-35 are civil enclaves. The
new airports are be commenced
by 2030.
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