With road developers not coming forth to submit bids, the highway building target of awarding almost 9,500 km may not be met this year.
The Ministry is likely to showcase current fiscal as a year when the longest length of roads were constructed.
Given the two-three years required for building roads, there is usually a gap between length of projects awarded and that constructed.
In the current fiscal, 99 km of highways have been awarded by the National Highways Authority of India (NHAI).
Tight liquidity
Majority of the projects were structured on the design-build-finance-operate-transfer model, which requires companies to raise funds from the market.
But given the tight liquidity condition which is increasing the finance costs, and in the backdrop of aggressive bidding by many developers last year, many project owners want to sell stakes to raise funds.
Even Larsen and Toubro’s development project arm – L&T Infrastructure Development Projects Ltd – is looking to raise funds by selling stakes in some projects.
EPC model
In this context, the Highway Ministry has increased focus on awarding the 3,000-3,500 km of highways on engineering procurement contract (EPC) basis.
In fact, the Ministry might also try to increase the length of projects that it awards on EPC basis. In the EPC model, Government spends the entire money required to build roads.
Last week, the Cabinet Committee on Infrastructure approved the contract document that will be used to award the projects.