10.7.12

Highway contracts come to a halt

Award of highway projects—so far the lone success story among the otherwise stagnant infrastructure sector—has come to a halt. The National Highways Authority of India (NHAI) has not managed to bid out even 100 km of highways against a target of 1,500 km fixed for the April-June quarter. 
The data will come as a big embarrassment for the Manmohan Singh government, which had only weeks ago vowed to get projects moving and had set an annual target for each sector. For national highways, Singh had set a goal of 9,500 km for the current financial year. 
The government decided to set a new record for project awards this year after a bumper 2011-12 when NHAI and the highways ministry managed to bid out contracts to construct nearly 8,000 km, and in several cases earned a premium. But with economic growth slowing down, bidders seem to have deserted the sector, which until recently was seen to be the 
most lucrative infrastructure segment. 
What has hit the highways sector hard is that most of the projects for which tenders were floated did not receive even a single bidder, leave alone any major player entering the fray. Only in a handful of cases, two bidders queued up. There are no takers for viability gap funding either, which will make the contracts financially viable. “Even some of the attractive projects have not got more than a bid,” conceded a government official. For example, there was single bid for Panchkula-Yamunanagar 
stretch in Haryana, while there were two for the Goa-Karnataka border-Kundapur stretch and even that 
happened after NHAI rebid the project thrice. There were no bids for at least five projects, said an official. A part of the problem may be due to banks pulling out. A worried highways minister CP Joshi has summoned developers, bankers and consultants on Wednesday to find a way out of the current logjam. 
Officials also said that major players already have their hands full, after bidding aggressively last year. “ When they got attractive projects they bid competitively and kept their profit margin at the minimum. But now they would bid for projects after factoring in a higher profit margin,” said a source. 
But what has foxed the government is the absence of smaller players from the arena. “We still have about 60 companies that have not got any project. So, they should ideally bid when government is offering VGF. They should not have equity issue since they have not yet exhausted their kitty. This indicates to major problem in getting finance for projects,” said an NHAI official.

No comments: