B S | New Delhi February 16, 2013
Key developments
Finance ministry, Government of India, has recently recommended public sector banks to be more cautious before deployment of any credit to the highways sector. It has asked banks to ensure the entire right-of-way is acquired by the National Highway Authority of India (NHAI) before disbursement of loans and promoters bring at least 50 per cent of their contribution upfront in the project
Clearance of the Land Acquisition Bill and setting up of the Cabinet Committee on Investment is expected to fast-track projects stuck due to clearance issues (Click on graphic)
Key issues
Land acquisition; largest roadblock: Of the 226 projects under implementation by NHAI, 58 are delayed due to land acquisition issues
Funding constraints: Despite a 14% y-o-y (Rs 25,360 crore) increase in Budgetary allocation to the Ministry of Roads and Highways in FY12, projects worth Rs 25,000 crore are awaiting financial closure. In FY12, 60 projects were awarded by NHAI, of which 35-40 projects are still awaiting financial closure
Use of PPPs: So far, NHAI has awarded projects on BOT toll/annuity, operation and maintenance and item rate basis. As seen in the recent cases, many projects could not be awarded on a toll basis, and annuity contracts are perceived to be expensive. Addressing this logjam will require re-modelling the PPP approach, and getting a better alignment with the objectives of private sector participation
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