Ministry seeks low cost funds for highway projects

New Delhi: In order to attract companies to invest in highway projects, the Ministry of Road Transport and Highways Ministry has approached the Finance Ministry seeking low cost funds.

“For the highway projects to take off, a special window from the Reserve Bank of India that will provide for extension of reasonable interest rates for highway projects could be considered,” said a Highways Ministry official.

The move comes on the back of National Highways Authority of India (NHAI) having to extend the last date of a series of highway projects due to lack of bidders. In the past few days, the last date of bidding for at least eight projects has been extended on account of shortage of bidders.

Highway developers have shunned several build operate transfer (BOT) projects of NHAI during the past few months. In September, developers had started withdrawing their bids from projects due to a Road Ministry clause that limited the number of projects they could bid for at any given point in time.

The rule barred companies from bidding if they were short listed in the technical qualification (request for qualification) stage for eight projects during a two-month period (preceding the due date for financial bid), or if they had won four projects during the period.

Subsequently, aiming to get a better response from bidders, the Road Ministry introduced further conditions that pretty much remove the above criteria in case there is a shortage of bidders.

Despite the relaxation, the response from companies appears muted leading to extension of dates of bidding by National Highways Authority of India (NHAI).

The projects with extended deadlines include stretches such as MP-Maharashtra border-Dhule (97 km stretch, Rs 675 crore); Pimpalgaon-Nasik-Gonde (60 km, Rs 752 crore); Muzaffarnagar-Haridwar-Dehradun (127 km, Rs 1,306 crore); Ghaziabad-Aligarh (126.3 km, Rs 1,325 crore), for which dates have been extended to November 21.

Similarly, the last dates of financial bidding for Tirupati-Tiruthani (125 km, Rs 802 crore), Hyderabad-Vijayawada (182 km, Rs 1,460 crore); Valayar border-Vadakancherry and Vadakanchery-Trichur have been extended to December 10 “We feel RBI could consider refinancing highways project funding with rates of not more than about seven per cent. Banks should not charge over 10 per cent levels,” said a Ministry official.

The highway builders lobby body National Highways Builders Federation (NHBF) has pointed out that the detailed project reports (DPRs) for the projects have been worked out with traffic data that are ‘overestimated’ and cost of funds that are significantly lower.

NHBF says that BOT (toll) projects wherein the traffic risk lies with the builder will be able to attract developers only if the cost of funds go down (to about 10-10.5 per cent levels against the current levels of 15 per cent or so).

Several industry players have said that for the projects to get attractive in the current market situation, NHAI will have to award the bids on an engineering procurement contract (EPC) basis or BOT (annuity) basis where the traffic risk is borne by the Government.