Govt to fund 30% highway projects

New Delhi: The government has decided to rework its highway construction strategy that will see lower private sector participation.This fiscal, the government has decided to directly fund at least one-third of the highway projects, a sharp contrast to last year when subsidy was provided to a handful of projects.
As part of the plan to award contracts for 7,300 km,at least 2,500 km of national highways (NH) would be built with 100% government funding, a plan submitted to the highways minister C P Joshi on Wednesday said.While these contracts would be awarded directly by the National Highways Authority of India (NHAI),the Centre and state governments will award another 1,500 km,with most of it to be awarded directly through cash contracts.
Over the last few years,the government has been roping in the private sector in a big way in the development of highways.Last year,for instance,all the 51 NHAI projects, spanning over 6,451 km, were awarded to private developers,and in most cases the government earned a premium that added up to nearly Rs 3,000 crore.
Officials told TOI that a part of the reason for reduced private play this year was the viability of the projects as most of them will need direct funding and the private sector may not be willing to lose money on these stretches. Private sector interest may be lower as the projects, to be executed through contractors, involve two-and-ahalf lane highways. Stretches which will be funded by the government are financially unviable because of low traffic volumes, said an official.
Also, the government is keen to accelerate road construction as it wants to ensure that the projects are ready before the 2014 parliamentary polls.The official added that majority of the six-laning contracts were awarded last year and only a few such projects would be up for grabs this year.
To ensure that road projects with full government funding are of the good quality and are completed on time, the government is finalizing a new engineer, procure and construct model for executing contracts. This model would have the provision of defect liability period, making the contractor responsible for the quality and maintenance for five years. Though initially the Planning Commission pushed the proposal of reducing this period to only one year, the finance ministry prevailed upon the plan panel.
All reputed highway developers would bid for these projects since these are big stretches and will bring them good money. There is zero risk for private players unlike the PPP projects. Moreover,these projects can take off without any land acquisition, which is single major reason of delay in completion of road works, said an NHAI official.

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Stretches that will be funded by the government are said to be financially unviable because of low traffic volumes The government wants to ensure that the projects are ready before the 2014 LS polls   Source>>>