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NHAI plans 50,000 km road projects worth US$ 250 billion

Livemint:  February 17, 2016

Mumbai: India will develop road projects spanning 50,000 kilometers and entailing investments of about $250 billion over the next five to six years, said Raghav Chandra, chairman of National Highways Authority of India (NHAI).

Chandra, who was speaking at the Make In India Week in Mumbai on Wednesday, said the private sector will play a huge role in achieving this target. About 240 road projects are currently being developed under NHAI, he said.

Prime Minister Narendra Modi-led government has put infrastructure development on top of its agenda. While the government has made it easier for road developers to monetize their operational projects, it is also trying to expedite construction of new highways through models like hybrid annuity, where the government commits 40% of the total project cost.

The 12th five year plan 2012-17 estimates requirement of $1 trillion worth of investment for the Indian infrastructure sector, of which the road sector’s investment is expected to be $95 billion. About half of this investment is expected to come from the private sector and overseas investors.

NHAI has a target of awarding 10,000 km of projects this fiscal. Upto January, 6353 km of projects have already been awarded.

The Nitin Gadkari-led ministry of road transport and highways (MoRTH) has now set a new target of building 100 km of roads per day from last year’s target of 30 km. In comparison, India currently constructs roads and highways of 18 km per day.

Gadkari on Wednesday said the ministry might not achieve the 30 km per day target by March 2016, but it was hopeful of reaching the 100 km target in the next few years.

India’s infrastructure firms, executing large projects, have struggled with project delays and rising debt. Many have also been hurt by a mismatch in traffic estimates, with growth in traffic not keeping pace with expectations at the time of bidding for the project.

Banks, which had so far kept these companies afloat, are also getting tough as they try and clean up their own books, leaving some companies with no choice but to sell assets.

NHAI’s Chandra on Wednesday said the government had already started work on about 40-50 languishing or stranded road projects.

Road projects in India are awarded in three formats. One is build-operate-transfer (BOT) annuity, in which a developer builds a highway, operates it for a specified duration and transfers it back to the government, which pays the developer annuity over the period of concession.

A second model is BOT-toll, under which a concessionaire generates revenue from the toll levied on vehicles using a road.

The third model is engineering, procurement and construction (EPC), under which a developer will execute engineering design, procure equipment, materials and labour and build a project; the government provides the money.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.