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NHAI using PPP model to build durable roads

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We have introduced Toll Operate Transfer (TOT) wherein we invite participation of the concessionaire or PPP partners in operation phase of the concession period. TOT mode are offered for the roads that are completed by NHAI under EPC. We had first made a bundle of such roads and then offered these roads for operation under TOT mode, says Niraj Verma, Member, Public-Private Partnership (PPP), National Highways Authority of India (NHAI), in conversation with Gautam Debroy of Elets News Network (ENN).

What are the achievements and challenges of Public-Private Partnership (PPP) model in highway sector?

The National Highways Authority of India (NHAI) is one of the leading players in the world in implementing PPP model in highway sector . Some PPP models being used by us are Built Operate Transfer (BOT) Toll, BOT Annuity, and Hybrid Annuity. NHAI is also implementing road projects under Engineering Procurement Construction (EPC) . In this mode, construction of road project is financed by NHAI. Coming back to PPP projects, I would like to mention that we have implemented many important road projects like the one in Delhi-Gurgaon (Gurugram), Ahmedabad- Vadodara, Chenani- Naseri tunnel projects etc Earlier, we had followed the waterfall mechanism for selection of mode of implementation. In this, we would first appraise the projects under BOT toll. For this, the equity return to the investors would be kept at 15 per cent. If these projects were not suitable under BOT toll i.e if the EIRR would be found less than 15 %, we would take up the project under BOT Annuity and only after failing in our attempt to take up under these two, we would have opted for EPC. However, in the immediate aftermath of economic downturn in 2008, there was less appetite for the BOT projects. We thus took up many projects under EPC. In December 2016, we introduced another form of PPP – the Hybrid Annuity mode or HAM. First example of successful HAM is Delhi-Meerut Expressway Package I. This project starts from Sarai Kale Khan and ends at Delhi-UP Border.

How would you describe the state of affairs in the context of Bharatmala programme?

Bharatmala pariyojna has several components like economic corridor, feeder roads, port connectivity roads, roads in Border areas, connectivity to religious places, bypasses and ring roads. In nutshell , we have an ambitious target of around 20,000 kms of roads to be implemented under Bharatmala. NHAI is one of the implementing agencies of MoRTH (Ministry of Road Transport and Highways) under Bharatmala. The other two agencies are State PWD under the Ministry of Road Transport and Highways and National Highways and Infrastructure Development Corporation Limited (NHIDCL), a sister organisation of NHAI. The NHIDCL is implementing roads in the Northeast and hilly areas under Bharatmala. As far as the present status of progress is concerned, we have prepared Detailed Project Reports (DPR) for more than 10,000 kms of roads. We have already awarded many such roads under Bharatmala.

Is there any roadmap or strategy to ensure expedition of the PPP model?

When we award projects under PPP, we try to ensure that we meet our condition precedents. In other words, there should be sufficient availability of work-front and prior clearances of environment/forest, etc, so that the concessionaire can start the construction immediately after the appointed date.

There were some PPP projects which had started languishing. For these projects, we have creatively used the available tools, which includes – giving one-time fund infusion (OTFIS) from NHAI to the eligible projects, increasing the concession period for the delay not attributed to the concessionaire (for BOT) or giving the missed annuity for Annuity projects. Several of such projects , which have been brought back on track through OTFIS, etc, are Delhi-Jaipur Road, Chhapra-Hajipur Road and Srinagar- Bannihal road.

How many PPP projects are in the pipeline for next five years and how many kilometres will be covered under it?

In next five years, Bharatmala targets are the priority targets, which are to be implemented by NHAI. More than 20,000 kms will be covered under Bharatmala project. We have taken decisionto take up 60-70 percent of roads under HAM, 10 % under BOT (toll) and the rest under EPC.

What are the three major challenges you face while implementing these projects?

PPP projects are basically a collaborative effort of the Government authority and the concessionaire. Once, we award the project, we have to meet our conditions precedent like availability of land through acquisition process, shifting of utilities, clearance from forest department, etc, as applicable. Ensuring that this is done in such a way that 80-90% of land is available is the first challenge.

Secondly, we have to ensure that the land is encumbrance free at the time of appointed date ( a date after which the construction work starts). In other words, the buildings etc in the right way should be demolished, the trees should be removed and the utilities (like electric lines) should be shifted at the time of appointed date.

Lastly, the concessionaire has arrived at the financial closure by tying up with the banks for bringing the loan amount. Subsequent to this, the construction is done. For this, the concessionaire is given six months under BOT (toll/annuity) and five months under HAM. Concluding financial closure within the stipulated time is another challenge as any further delay would mean that the project would get delayed.

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