Road-builders looking to bag engineering procurement contracts (EPC) of over Rs 12,000 crore from the National Highway Authority of India (NHAI) may have to settle for only up to Rs 2,200 crore in the current fiscal. This is because NHAI will make payments based on project status.
“The payout to successful bidders will be based on completion milestones. And the roads will be built over the next two-three years. So, the expense for NHAI will not be significant,” said NHAI officials.
The highway authority is expected to start the award process in the second half of this fiscal, as the Cabinet Committee on Infrastructure (CCI) approved the contract documents a few days ago.
Mobilisation advance
However, the bidders can receive some mobilisation advance, wherein they can claim up to 20 per cent of the project cost.
NHAI plans to award about 3,500-4,000 km of highways this year in EPC mode. This shows a sharp change in trend from the last five-six years, when its focus was on design-build-finance-operate-transfer (DBFOT). In an EPC, the entire road building cost is borne by NHAI, while in DBFOT, the developers finance the road construction and recoup their money from toll revenues; or through bi-annual payouts from NHAI over a long-term period.
All these EPC projects are for two-lane roads with paved shoulders. NHAI will not need to spend much on land acquisition as these are two-lane highways with right of way on both sides.
Liquidity crunch
Annually, NHAI receives about Rs 7,700 crore from fuel cess and Rs 4,000 crore as toll receivables and revenue share from highway developers.
According to Road Ministry estimates, up to December 2011 in FY12, NHAI and the private sector together had incurred an expenditure of Rs 26,408.47 crore. Of this, 28 per cent came from the Government kitty and the rest from the private sector.
This fiscal, DBFOT projects have found no takers among private players, as developers are facing a liquidity crunch.
In this backdrop, the Government’s 9,500-km highway target may not be met this year. Nevertheless, the Ministry is likely to showcase this fiscal as the year when the maximum number of road kilometres was constructed.