The National Highways Authority of India has no plans to abandon the Public Private Partnership model in favor of the Engineering, Procurement and Construction route for building highways as projected in an article published in a leading financial daily recently.
According to the nodal agency for development, maintenance and management of national highways, more than 150 projects were awarded under the PPP model since FY 2009-10 with most being in various stages of implementation at present.
Refuting the views expressed in the article, NHAI said that it had proposed adoption of the EPC route for projects that were likely to elicit poor or no response with the intent of reviving the road sector and kick starting the economy. Justifying its decision, the highway development agency pointed out that 17 projects under BOT (Toll) and three projects under BOT (Annuity) had not received any response despite being put up for bidding one to five times.
The main reason for poor or no response to projects put up for bidding under BOT(Toll) mode was acute shortage of equity and over leveraged and deeply stressed balance sheet of the highway developers, NHAI said in response to the report in the financial daily, adding that its chairman or the board was not empowered to pro-actively and dynamically manage the concession agreements even in situations where underlying conditions had undergone a drastic change such as shortfall in the growth rate of traffic and economy. The lack of clarity on various issues such as taxation, clearances and pay ability of stamp duty is also considered to be a cause for the discouraging response from highway developers.
Stressing that it was not against PPP and still inviting bids on BOT (Toll) basis in appropriate cases, the highway development agency said that the PPP model would again be tried on a much larger scale once the economy picked up and there was liquidity in the market.
Commenting on the experience so far in awarding EPC projects, NHAI said the response was good and the bids received were generally below its project cost estimates. It denied having any plans of going back to the old EPC contract on item rate basis where design and estimate of itemized work is pre-fixed and the contractor gets payment for work done for each item.
In the EPC mode adopted by the NHAI, the design and construction responsibility is assigned to the contractor for a lump sum price and monitoring and supervision needs to be undertaken through a qualified firm selected transparently. The model EPC document had been approved by the Centre.
Around 240 highway projects have been implemented by the NHAI through PPP.