Road developers look to next govt
Over recent years, National Highways Authority of India (NHAI) is not ready to accommodate an increase in project costs due to which road developers are in a fix.
Since a number of projects have seen a 30 per cent rise in costs such as rise in bitumen, diesel and labour expenses, besides interest rates, developers expect that the government should approve a revision in cost estimates. If the developers walk away there is a possibility that this project may go for re-bidding.
By permitting a rescheduling of premium for highway projects, the government had announced a relief package for road developers last month. The developers hunted for the revision of the approved cost estimates by the government, to help them begin work. But as per sources NHAI declares that no such proposal will be approved.
A senior official at NHAI alleged, “Why should we? There is no clause as such in the concession agreement. These are projects where not much has been done at all and the developers kept sitting. We can’t deliver everything on a platter to developers and now the government has allowed rescheduling, too.”
Due to various factors in recent years road project bids have seen up to a 26 per cent rise in costs. The National Highways Builders Federation had written to the prime minister for intervention.
“There are some projects where major delays have occurred in declaring the appointed dates due to reasons not attributable to the concessionaires. The cost of bitumen, diesel and manpower has gone up significantly. Interest rates, too, have seen a sharp rise and impacted project cost even in the base case, impacting the returns,” read the letter.
M Murli, director-general of the federation
For the distressed sectors the government can take these measures to improve cash flows, said M Murli, director-general of the federation. The same was extended to other sectors in the past and our sense is, as per him if at all the government takes a decision to void the contract and go for rebidding, it will have to make revised cost estimates, since the projects were awarded three years ago. Since then a lot has changed and hopefully the new government will take a decision.
In the past developers had bid aggressively to win contracts, promising the government higher and higher premium. Attracted by the promise of easy money, the government handed out as many as 147 projects. While bidding aggressively, the developers assumed India’s high economic growth would continue unabated. Though opposing to their expectations in recent years, growth slowed down. Consequently, companies have till now managed to complete only three projects. Spread over 20-25 years, developers owe NHAI a combined premium worth Rs 1.51 lakh crore.
Source: Business Standard
bitumen, Developers, Diesel, Economic growth, Government, Highway, India, Interest rates, Labour Expenses, M Murli, Manpower, National Highways Authority of India, NHAI, not ready to accommodate an increase in project, rise in bitumen, Road developers, Road developers look to next govt
