Over 30 highway development projects worth over Rs 8,800 crore are stuck for want of land.
Land acquisition has been delayed by various government agencies including State administrations and the Environment Ministry as also because of the disagreements on the price to be paid to land owners.
The National Highways Authority of India depends on State governments to make land available.
The projects were awarded in 2009 and 2010 to companies such as IL&FS Transportation Networks Ltd (ITNL), Larsen and Toubro, Soma Enterprises, IVRCL, Reliance Infrastructure, Sadbhav Engineering, GVK, HCC Ltd, Madhucon Projects, and B Seenaiah & Company. The estimated value of some of the projects, according to 2009-2010 prices, are: HCC’s three projects (over Rs 2,600 crore), KMC (Rs 2,500 crore), Reliance Infrastructure (Rs 953 crore), ITNL with Punj Lloyd (Rs 1,460 crore), IRB with MRM (Rs 705 crore), GVK (Rs 593 crore).
BLOATING COSTS
The delay in land acquisition for these projects, many of which are for four-laning, is bloating project related costs.
First, the cost of finance has gone up.
“The interest costs were 8-8.5 per cent two years ago. Now, they are 12-12.5 per cent,” says Athar Shahab, Chairman, CII Infrastructure Committee. He is Deputy Managing Director of IDFC Projects, a company whose project with a Malaysian firm has only 5 per cent of the land needed.
Second, there is annual input cost escalation of 7-8 per cent.
Third, there is an impact on the revenue earnings of companies, as they cannot start collecting tolls.
The issue of environment clearance is also impacting some 40 projects, says M. Murali, Director-General, National Highway Developers Federation.
“Most of the roadside plantations have been declared as forest land. So, widening of roads requires environment clearance, a minimum one-year exercise,” says Athar Shahab.
“NHAI should disclose the extent of land acquired for each project at the pre-bid meeting stage itself.”
While a clause in the concession agreement provides for some penalty payment by NHAI for such delays, some players admit in private that the amount is rather low for them to pursue it with the Authority. Others say the NHAI asks them to waive such penalties.
MORE LITIGATION
“In the long run, this will add to litigation,” says another company head. Moreover, most players expect that the concession period — the number of years for which these companies have the right to collect toll — will get extended.
Also, lending agencies have become more careful about checking all these details.