DARE - Because Entrepreneurs Do

National Highway Project, the ambitious project of building highways crisscrossing the country, seems to be making a comeback after hitting a snail's pace during the last government. National Highway Authority, the autonomous body formed to oversee the highway development works, saw as many as four new chairpersons in one year, thanks to the meddling by none other than the then Transport Minister T.R. Balu. The slow pace of road construction was widely criticized in media and by economists. Surprisingly, the opposition failed to cash on making this an important issue in the elections, though this had all the potentials of creating problems for the Manmohan Singh government. 

With the Congress-led government  returning to power with a better mandate, the Prime Minister realized the mistake, and has brought a more active and decisive person in the Transport Ministry.  The ministry, which  has already missed several deadlines, seems to be trying to catch up. The ambitious Golden Quadrilateral of highways still remains incomplete and the National Highways Authority of India (NHAI) was unable to award a single project in 2008-09. 

Kamla Nath, who  earned praise for his work as Commerce Minister, has already announced an ambitious plan to construct 20 km of road on daily basis. For this, he has already sought doubling  budgetary allocation to Rs 6,000 crore from Rs 3,350 crore as available currently.

Kamal Nath is also seeking to earmark funds for projects other than those under the NHAI. The Minister is pitching for a "Road Finance Corporation (RFC)" with an initial corpus of Rs 500 crore to provide easy financing options for the sector.This may probably prove important as the investment required under the 11th plan is estimated at Rs 3,50,000 crore. This would be reuired to complete a road length of 70,000 km. Of this, state spending is limited to Rs 2,50,000 crore and the balance has to be mobilised from the private sector under the public-private partnership (PPP) route. RFC can be particularly  important for a time when slowdown grips economy, as is the case right now.

In order to rekindle the interests of the private sector bidders in the highway projects,  NHAI  has restructured the cost of about 35 projects across the country. It has sought to innovate a lucrative model for private parties. This ia hybrid model combining both toll as well as annuity payment under build operate transfer (BOT) scheme. According to the proposed model, a concessionaire will get the viability gap funding (VGF), meaning the gap between the cost of the project and the expected return, up to a maximum of 40% of the project cost from NHAI. However, in case the developer needs more than 40% VGF, it has to make its own investment.

These efforts have borne fruits, and the private parties have started showing enthusiasm in the latest round of bidding for upcoming projects.  Of the bids invited recently for 35 road projects worth Rs 39,000 crore, 25 received enthusiastic response so far in the technical bidding stage, a far cry from the scene in the previous government. 

These sound good, but will these bring back the highway program on track? Will the Minister's ambitious target of 20km of highway every day become a reality? This is not so easy. Planning commission has already raised objections to the hybrid model, the NHAI have used to invite tenders for the upcoming projects. Eyebrows have been raised over the target of 20km a day. Red tape is still there to slowdown the pace of highway development. Private players are restricted to bid for more than eight projects, and documentation required on their part while bidding for projects run into more than 9,000 pages right now. NHAI has asked Kaml Nath to cut on these. Time taken from the bidding to actually winning a bid is more than four months right now. It is important to cut on this.

 One things is for sure - there is a realization among the top rungs that highway program needs to gather some momentum now. Intentions for the same has been shown. What remains to be seen is whether the good intentions translate into action cutting across all bureaucratic hurdles. Hopefully, it will be so this time.