NHAI tweaks strategy for Rs 3 trillion projects under Bharatmala scheme

Mumbai: High land acquisition costs have forced the National Highways Authority of India (NHAI) to tweak its strategy for project implementation. The NHAI has decided to consider only those projects that require minimal land acquisition as it finalises highway contracts worth about Rs 3 trillion under the Bharatmala scheme.

Reprioritising its execution strategy, the Authority will change the weight it gives to different factors while planning projects. Earlier, freight movement and revenue from projects were given precedence over land acquisition. This essentially means existing projects that need expansion may get priority over new ones. 

“This will help in getting a better fix on viability. Projects that have financial viability will be considered,” a senior NHAI official said, adding these projects were part of the broader Bharatmala scheme.

Asked whether the other factors (freight and revenue) would be overlooked, the official said those aspects would not be ignored but the land component would be given more weight.

The reason for shifting priority is land compensation costs, which increased after the new Act — the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (LARR) — came into being in January 2014. Before the Act, the land acquisition cost made up 10 per cent of a project’s cost. This has now risen to 30-40 per cent.

The Ministry of Road Transport and Highways and the NHAI are ready with a list of projects that would be awarded as soon as the new government takes office. The land acquisition and other regulatory approvals for these projects, totalling a length of 6,500 km, under the Bharatmala scheme are complete, an official said. He did not divulge more details about these projects.

The ministry set a target of constructing at least 12,000 km of national highways in 2018-19, as against 9,829 km achieved during 2017-18.

According to the latest official data, 5,759 km has been completed (till November 2018) in 2018-19.
In October 2017, the Union Cabinet cleared the Bharatmala project to construct highways connecting the length and breadth of the country at an estimated investment of Rs 7 trillion. These corridors have been conceptualised to permit faster movement of cargo vehicles.

The first leg of the project is expected to cost Rs 5.5 trillion and would be funded through various sources, including Rs 2.09 trillion from the market, Rs 1.06 trillion through private investment and Rs 2.19 trillion from the central road fund or toll collection.

The NHAI plans to raise Rs 10,000 crore through Bharatmala Taxable Bonds in 2019-20. Under Phase 1 of the Bharatmala Pariyojana, the government has approved the implementation of 24,800 km of highways and 10,000 km of balance National Highways Development Projects over five years — from 2017-18 to 2021-22. The total length of projects under Bharatmala is 65,000 km.

The overall market borrowing for the Bharatmala project is estimated at ~2.09 trillion till 2021-22. The project was first mooted in April 2015 and aims to connect Gujarat and Rajasthan, then move to Punjab and cover Jammu & Kashmir, Himachal Pradesh, Uttarakhand followed by Uttar Pradesh and Bihar and further to Sikkim, Assam, Arunachal Pradesh, right up to the Indo-Myanmar border in Manipur and Mizoram.

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