Gadkari's ministry wants to decide PPP concessions agreements, will this boost highway building?

New Delhi: The Ministry of Road Transport and Highways is finally going to seek Cabinet approval for autonomy. It wants to decide how to devise and amend model concession agreements (MCA) for highway projects given out on PPP basis on its own. As of now, any and every amendment in the MCA of every highway project has to be cleared by the Cabinet since each MCA itself is approved by it. This means even for small changes which the ministry and the private developer together want, there is a cumbersome process involved. More often than not, the required changes are not made to the MCA due to these procedural hurdles and this has lead to a lot of highway projects remaining in limbo.

That the PPP model has not really worked in the highway sector till now is apparent and minister Nitin Gadkari has admitted as much in the recent past. Though unavailability of land, banks’ refusal to advance loans etc are some reasons why bidders did not come forward under the PPP model, inability of the ministry to amend MCAs is also a major reason why stalled projects could not be revived. The PPP model is expected to get a boost if the Cabinet approved the ministry’s proposal.

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At present 180 road projects under PPP mode valued at Rs 1.9 lakh crore are under construction through various agencies.
A senior ministry official told Firstbiz that the Cabinet note in this regard is ready. Various stakeholders including concessionaires, lenders and industry bodies have been demanding a relook at the MCA to address dispute resolution, cost escalation etc to revive stalled projects.

The official quoted earlier said the National Highways Authority of India (NHAI) had “unparalelled domain knowledge of PPP projects. Why should each amendment in the MCA go to the Cabinet? We need to revive the PPP process and this is an important step”.

The ministry will not only seek powers to devise and amend concession agreements of highway projects, it also wants to be able to decide whether a project should be given out on PPP basis on not. “We want the power to decide mode of delivery also,” this official said.

Minister of State for Road Transport & Highways Krishanpal Gurjar told Rajya Sabha in a written reply last week that “Twenty-one projects were bid out by National Highways Authority of India (NHAI) through public-private-partnership (PPP) route but none of the projects has received any response.” He said due to lack of equity in the market “there has been a lukewarm response from the builders for the projects under PPP mode during 2012-13 and 2013-14.”

Perhaps with the Ministry set to get autonomy to decide what terms and conditions to set for PPP projects, this situation may imporve. According to a story in the Hindustan Times newspaper, the government is all set to clear seven major highway projects entailing an investment of Rs 16,000 crore. The story said that the highways ministry has moved a cabinet proposal to approve seven projects on PPP mode running to a total length of 852 km.

The projects include the Rs 7,855 crore Delhi-Meerut Expressway that has been on the drawing board for almost a year. Other projects going for approval include the Rs 2,342 crore four-laning of a bridge in Varanasi located near the Indo-Nepal border; four-laning of a 146 km stretch of the Sulatnpur-Varanasi highway in Uttar Pradesh, worth Rs 1,975 crore; and four-laning of a 99 km stretch of the Yadgiri-Warangal section in Andhra Pradesh, worth Rs 1,487 crore.