After a miserable performance in the previous fiscal, the National Highways Authority of India (NHAI) is ready with new work plan for current financial year and planned to award around 5,000-km highway contracts in FY15.
As per the NHAI work plan, about 2,300 km of highway projects with a total project cost of over Rs 15,000 crore will be awarded through cash contracts, or Engineering, Procurement, Construction (EPC) mode and 3,000 km projects with cost of over Rs 35,000 crore to be bid via the public-private partnership (PPP) mode. However, the NHAI’s work plan reflects the continual gloom in the sector. NHAI is likely to award projects through EPC mode if it is able to acquire 90% of the land. On the other hand, final award on PPP mode would depend on the market response. So far, bidders’ response to PPP mode remained poor and NHAI would convert PPP to the EPC mode if no bids are received. If PPP projects have to be converted to the EPC mode, then NHAI's financial capacity would have to be examined. Over the past few month, developers’ interest towards PPP mode projects has declined as raising equity for highways PPPs has become difficult.
Over the past few years, road sector is struggling with slowdown and the NHAI had blamed the issues like financial stress, land acquisition delays and environmental clearances and enhanced construction risk for the current downturn in the sector. During FY14, NHAI has managed to award around 500 km of road projects, while in FY13 only 1,116 km of projects were awarded against a target of 9,500 km.
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