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NHAI cancels 2,500 km of highway projects; to auction after cost revision

24 Mar 2014 Evaluate

Projects awarded to road developers to build 2,500 km of highways have been cancelled amid concerns over land acquisition delays, environmental clearances and non-payment of performance guarantee. The National Highways Authority of India (NHAI), which awarded most of these 23 projects during 2011-12, mentioned that owing to the prevailing economic slowdown, firms did not respond to many bids floated by it. NHAI reported that fresh bids for such projects can be invited only after a public-private partnership appraisal committee revises the costs upwards considering the inflation since the time when these projects were awarded.

NHAI further added that more road projects are expected to get cancelled as many road developers who have not yet started working on the projects awarded two-three years ago are yet to take a clear stance on whether they will continue or surrender the projects after evaluating the premium re-scheduling proposal, which was approved recently. The proposal permitting premium deferment will mainly help projects on which work has already started. As per the premium deferment proposal, 75 percent of the premium amount payable by the road developers to the government will be restructured in the first three years of the contract.

Over the past few years, Indian highway sector has been facing issues like financial stress, land acquisition delays and environmental clearances, enhanced construction risk. So far this fiscal, NHAI has managed to give just 479 km of road projects against its target of 3,000 km by September. In the previous financial year, only 1,116 km of projects were awarded against a target of 9,500 km.

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