NHAI opens up new highway stretches for construction
Indian Express

Having evinced enthusiastic participation from private players in road projects across the country, the National Highways Authority of India (NHAI) is now moving onto the next level. The country’s premier road development agency has now opened larger stretches of over 200 kilometres on a Build-Operate-Transfer (BOT) basis — a move that has been largely welcomed by infrastructure developers in the country.

The projects involve six laning of select stretches under Phase V of the National Highways Development Project (NHDP). These include construction of the 225-km long Gurgaon-Kotputli-Jaipur stretch of NH 8 at an estimated cost of Rs 1,517 crore, and the ambitious 290-km Panipat-Jalandhar stretch of NH 1, which would cost approximately Rs 2,200 crore. The 240-km Surat-Dahisar highway connecting Gujarat and Maharashtra is another stretch that is up for bidding.

The move has roused the interest of several private players in the country, who view longer road projects as an ideal way to increase operational efficiencies. Says Ankineedu Maganti, director of Soma Enterprises which is bidding for all these large projects, “Compared to undertaking a 50-km long stretch, a 100-km one can reduce costs by over 2-3 per cent. With large projects costing anywhere over Rs 1,000 crore, the cost saving can be significant.”

The reasons for better cost efficiency are clear: Construction equipment and machinery, which are currently utilised sub-optimally due to the limited length of roads, can be more efficiently deployed on larger stretches. Similarly, skilled manpower (which is short in supply) can be employed more gainfully over larger projects, says Maganti. Result: Better quality roads and easier supervision of construction.

Significantly, experience in tackling large BOT road projects in the country will also allow domestic developers to take on international projects. “To take up a large project in a foreign company, one needs to have the requisite experience in order to be able to pre-qualify for bidding. Such large new BOT projects in India can give us the expertise,” feels Harsh Shrivastava, vice president, marketing and business development at Feedback Ventures, a leading infrastructure consultancy firm.

However, while large infrastructure players like Larsen and Toubro or GMR would be qualified to grab large slices of these road projects, smaller companies fear they may have to settle for the crumbs. Says Sandip Bose, general manager, business development at Tantia constructions, a mid-level infrastructure developer, “Since we are smaller in size, we would not have the financial or technical strength, as well as expertise mandated to qualify for such projects alone. A joint venture partner with impressive experience would be needed.”

Adds Shrivastava, “Since large projects would have many qualification criteria, the number of bidders would be few. This may not lead to the best price realisation for NHAI.”
Some experts also feel that the grey areas and problems in infrastructure policy need to be addressed, in order to reap the full benefits of economies of scale. Says Rohit Modi, chief executive (roads and bridges) developmental projects at Larsen and Toubro, “The current custom’s duty notification disallows transfer of imported equipment and machinery for a period of 5 years. Since most of our projects get over within 2-3 years, the equipment lies redundant thereafter. Such issues need to be addressed.”

Despite the existence of policy-related issues, land acquisition and environmental clearances, India’s large road projects are also evincing interest from foreign shores. A number of leading international infrastructure players like Liang O Rourke of UK, as well as Obayashi and Teisei Corporations of Japan, are exploring their options in India, providing a ripe opportunity for cash-rich infrastructure joint ventures to bloom in the country.