>ROADS & HIGHWAYS – NEXT BIG LEAP : Projected investments in Roads in 11th plan (KR CHOKSEY)

Roads
Indian road network is second largest in the world aggregating 33 lakh kilometers. Road transport is a crucial link in connecting cities and villages of India handling more than 61% of the freight and 85% of the passenger traffic in the country. National highways constitute only 2% of the total road network length; however it carries nearly 40% of the traffic on Indian roads. Number of vehicles has also been growing at an average pace of 10.2% per annum over the last five years and the 11th five year plan, is targeting a growth of 9%. India needs better road networks as the cargo and passenger traffic is expected to grow at an annual rate of 13-15%. Investments in road sector during 11th five year plan is projected at Rs 3,66,843 crore at 2006-07 price levels.

Outlook
Golden Quadrilateral is 97% complete, while 27% of the work is being completed in the North, South, East, West (NS-EW) Corridor project. Government has also enhanced allocation to National Highway Development Programme (NHDP) by 19.3% to Rs 12,966 crore in 2008-09. Under the proposed plan of NHAI, still 821 km under NS-EW Phase I&II and 10,034 km under Phase III are to be awarded. Government also expects 36.1% of the total investments from the private sector. Hence there is significant opportunity for the companies working under Public Private Partnership (PPP). With the annual passenger traffic growth expected at 12% to 15% per annum and cargo traffic expected to increase by 15% to 18%, the National Highway Development Programme (NHDP) envisages a total investment outlay of US$ 50-60 Bn over the next 5 years.

Revamp under UPA 2.0
The UPA government’s re-election will provide five years of political stability to push vital reforms and boost the economic growth. Mr.Kamal Nath’s appointment as Minister for Road Transport and Highways was a major revamp strategy and a “Beginning of New Era” in changing the face of the Indian Roads & Highways landscape. In order to strengthen the Indian road network Mr. Nath has proposed a mammoth task to “build 20kms a days or 7,000 kms a year or 35,000kms in the next 5 years”.

Steps already taken
■ Handing over 80% of land at the time of award and the remaining during construction.
(Previously 50%).

■ Removal of Clause 3.5.2 of RFQ which restricted bidding to the top 5-6 bidders will now ensure greater participation.

■ Viability gap funding (VGF), which earlier provided 20% at funding during construction phase
and 20% during O&M, now the entire amount will be provided during the construction phase, thus improving the cash flow streams of the developers.

■ Estimated project cost has been increased by 20% for projects where Detailed Project Reports (DPR) was completed before 2007 and by 10% for projects where DPRs were completed post 2007.

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