Private investment in highway projects declines in seven years
For the first time in seven years, private investment in highway projects has declined, as per the data compiled by the highways ministry till February it has been witnessed a dropping in 2013-14 as compared with the all-time high of2011-12.
Projects for 1,116 km were awarded whereas construction was done over 1,661 km which is around half of the average over past decade, throughout the fiscal.
An industry expert alleged, the ones who have engaged in the earlier boom, around 2009-10, have now realised that their predictions are no longer matching. That was the reason why many projects faced financial issues and required restructuring. The second boom occurred in 2011-12, but during that time there was lot of insistent bidding. Ultimately this has led to the current decline.
Over the past decades, in the highway sector the share of the private sector in total expenditure has increased from 18 per cent in 2004-05 to as much as 61 per cent in 2011-12.
Project award was highest at 6,644 km in the same year. Though awards plummeted as private sector started to back off from taking on new projects, construction peaked at 2,844 km in the following year. As per the estimation of experts, due to measures taken up by government this slowdown will be reserved in coming years.
Vinayak Chatterjee, chairman, Feedback Infra said, Road sector has seen massive boom in private sector participation, if comparison is done of the past 10 years with the previous 50 years. There is no requirement to be excessively depressed when things hit a bad patch. Any sector which undergoes quick phase of growth enters a phase of restructuring ultimately .That is what has been witnessed in last two years.
Over the past 10 years, private sector spend on highway projects has reached Rs 1,06,218 crore,out of which more than 27,000 km have been awarded and over 18,800 km have been built.
To make it easier the government has comforted the process of environment and forest clearance for linear projects, introduced equity divestment by concessionaires and deferral of premium payments on top of that eased lending norms for road projects. To keep things moving in the short term, the ministry is also looking at the cash-contract model. Though, actual recovery could take a while.
Abhaya Agarwal, partner-infrastructure & PPP at EY alleged , “Considering the time required for financial closure of existing stuck projects and a successful construction period of one-and-a-half to two years, the actual recovery may extend anywhere between a two to three year period.’’
During Atal Bihari Vajpayee’s tenure as prime minister in 1998, the highways sector got a boost with the National Highway Development Project (NHDP) programme which was launched then.
Source: Economic Times
Abhaya Agarwal, Atal Bihari Vajpayee's, environment and forest clearance, equity divestment, EY, Feedback Infra, financial closure, financial issues, Fiscal, Government, highway projects, Highways ministry, infrastructure & PPP, linear projects, National Highway Development Project, private investment, Private sector, restructuring, total expenditure, Vinayak Chatterjee
