Uncertain future of some large road projects
A final decision on the future of large road projects awarded by the UPA-II government including widening of the 555-km Kishangarh-Udaipur-Ahmedabad road bagged by GMR will depend upon the next government. The reason for this is that some developers will start project only if the National Highways Authority of India (NHAI) compensates them for the leap in project cost due to delay in clearance from the government.
An official says that in such situation, even if the allocation of project were to be cancelled, the fresh bids cannot be invited before the project cost gets revised. The process to change cost depends upon Cabinet nod, which will happen when the next government will take charge.
As the Government gets a premium payout for these projects, it is opposed to cancelling the project as well. The cost of these projects were estimated three years ago, since then, the development cost have shot up because of the rise in bitumen , diesel and labour costs. The government estimated project cost is important as these help to tell the banks’ lending exposure to the project.
Cost Factor
The currently sanctioned projects to defer premium payments does not give enough leeway to developers to begin project that have not started off, even though it will improve cash flow for developers who have already started work but are facing problems. The Developers have been seeking composure through premium deferment and cost rise. Whereas, the Government took a decision on premium deferment but not on cost rise.
Mr. M Murali, Secretary General of the National Highway Builders Federation says that some developers will able to start projects only if they are compensated for the rise in construction costs.
Some developers, including GMR, had ruled out or were planning to rule out from projects they had bid for by offering to pay high premium to the highways body.
Source: The Business Line
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