This story is from April 21, 2016

How the government got stalled highway projects started

How the government got stalled highway projects started
NEW DELHI: Fast tracking infrastructure projects is one of the government's main goals, Prime Minister Narendra Modi said recently.
"Our endeavour is for a quantum jump (in infrastructure), for a breakthrough, for fast-tracking projects," PM Modi said at the recent launch of the Rs 50,800-crore Setu Bharatam project, that will ensure highways without railway crossings by 2019.

The government's focus on infrastructure has meant that this year's Union Budget has earmarked Rs 97,000 crores for the roads and highways sector.
"Infrastructure plays the same role for the nation as arteries play in a human body and thus, making it sound is quintessential," PM Modi said.
But what happens when projects are awarded without adequate groundwork?
The projects languish, suffer from unnecessary delays and cost overruns. That has been a common story with much of the public works in India, even those that are of critical national importance, like infrastructure development and highways.
In 2014, at least 73 National Highway projects with an aggregate length of over 8,000 kilometres were exactly in that state. And that meant around Rs 100,000 crore that was the capital required for these projects remained blocked.

Last September, the Times of India reported how the Prime Minister's Office had stepped in to get at least nine road and power projects moving, as part of an exercise to revive stalled projects, which are putting a strain on developers as well lenders, i.e the banks.
Sources in the government have now told timesofindia.com on how the Ministry of Road Transport and Highways has taken proactive measures to identify bottlenecks, resolve them and get the stalled projects moving. Of the 73 projects, issues with some 19 still remain and these, senior officials say will be resolved at the earliest.
At least 15 projects have been comprehensively resolved and that means India will have over 2000 kilometres of new roads soon. Contracts for some 39 others were terminated and these are be restructured, rebid and re-awarded.
Here are some of the measure taken by the government and the impact it has had in spurring stalled projects:
Securitization of future cash flows on Build-Operate-Transfer projects:
Action: Allows concessionaires with surplus revenue to raise a subordinate loan that is not more than 30% of the total project cost. This is based on projected future cash flows and can be invested as equity in other road projects.
Impact: 7 projects benefitted with the securitization amount being over Rs 415 crore
"Premium deferment in stressed projects:
Action: Those awarded projects can reschedule the premium they had committed during the bidding process.
Impact: Premium of Rs.10,000 crore deferred in 19 projects.
Substituting concessionaires
Action: A policy that allows substitution of any concessionaire in a financially stressed project with another in a harmonious manner.
Impact: 2 projects have benefitted from such substitution.
Uniform Exit Policy
Action: A policy that permits 100% divestment by the company which has won the contract 2 years after the construction is completed. This is applicable to all projects under the build-operate-transfer (BOT) model irrespective of the year the project was awarded.
Impact: At least 7 projects have benefitted from this exit policy.
In addition, policy changes have also enabled a revival and completion of all Bot projects that were half finished. The National Highway Authority of India (NHAI) can make a one-time fund infusion in projects that have achieved at least 50% physical progress, with adequate due diligence and checks on a case-to-case basis. The NHAI has also been authorised to revive stuck projects by rationalising the compensation to companies incase delays in the projects are not attributable to them.
The government is also focussing on having regular consultations with all stake-holders to discuss challenges they face and work out a practical way forward. Learning from these sessions, officials feel, will also result in pre-empting such issues and taking corrective steps in time for future projects.
India's Highway Story-Infographic

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