The Ministry of Road Transport and Highways recently released a white paper on the functioning and performance of the National Highways Authority of India during the last five years with the objective of revealing the policy issues and deficiencies in project implementation that plagued the road sector under the previous UPA government.
Analyzing the various factors that led to the dismal performance of the road sector during the last five years, the white paper said undue importance had been given to the award of projects without considering project preparedness as a result of which the NHAI awarded projects under pressure even when land was not acquired to the required extent and clearances were pending.
“Awards became a numbers game. Lesser attention was given to working out a strategy to enable timely completion of projects. Slippages started to occur. When project execution suffered continuous slippages, stress on the sector became very high. NHAI had to go into a firefighting mode fighting a losing battle, the developers lost opportunities and suffered underutilization of deployed resources, lenders had to cope with defaults in debt servicing, requests for debt restructuring, non-performing assets etc., the public could not avail the benefits of completed roads and the government itself lost enormous revenue which it could have received had the projects been timely completed and stakeholders received their just dues,” it said.
The white paper held the actions of the Department of Financial Services – Ministry of Finance, and the Ministry of Environment and Forests responsible for bringing the road sector to its knees. Citing examples, it said that the MoEF, based on a wrong interpretation of the Supreme Court judgment in Lafarge case, refused environment clearance to road projects till the time forest clearance was given, even where the related stretch had negligible forest area. Similarly, the DoFS took a contradictory stand against another wing of the Ministry of Finance. Even though the model concession agreement approved by the DoE required 80 percent of the land to be made available on the appointed date, the DoFS instructed all state owned banks not to lend to road projects unless 100 percent land was available. Since none of the road projects had 100 percent land, banks refused to lend. The DoFS later changed its stand but the delay impacted the viability of several projects, many of which had to be foreclosed or terminated by the NHAI. The DoFS also insisted that banks lend only to those developers who could bring and invest 100 percent equity upfront, further curtailing loans to road projects.
“Though it has become fashionable to cite aggressive bidding as the reason for the collapse of road sector awards made in 2010-11 and 2011-12, the impact of such aggressive bidding could have been contained if MoEF and DoFS had not acted in the way they did,” the white paper said.
The white paper did not spare Ministry of Railways and Ministry of Defence either for delays in grant of clearances. It said 90 ROB/RUB clearances from Railways were yet to come through with some clearances pending for as long as three years. Similarly, the Ministry of Defence had delayed the transfer of defence land in many cases and some of the clearances were pending for as long as five to seven years.
“Ministries whose contribution was integral to the timely completion of projects went about their task unmindful and unconcerned with the crisis they were creating due to delayed clearances/sanctions, secure since the system demanded no accountability from them,” the white paper said.
Providing details of the operational, financial and regulatory challenges faced by road projects during the last five years, the white paper said a number of corrective measures had been initiated by the NHAI during the last three years to bring the sector back on track. The measures related to project preparation, dispute resolution, classification of loans to highway projects as ‘secured’ and premium rescheduling.
The white paper suggested more corrective measures including grant of functional autonomy to the NHAI for bringing bank normalcy to the sector.
“Functional autonomy granted to NHAI was an important factor in the successful execution of NHDP Phase I, and part of Phase II. This has been diluted and the Central Government has assumed the role of decision maker, intervening in many of the decision makings which are in the domain of NHAI. Such interventions should be curtailed and NHAI should be given clear targets and empowered to chart its own course to achieve such targets,” the white paper said. It also called for making accountable the ministries and departments whose clearances were critical for orderly execution of road projects.