Government’s highways push picks up speed with foreign funds
(This story originally appeared in on Sep 24, 2015)
NEW DELHI: Last month, when a consortium led by Canada’s Brookfield Asset Management shelled out Rs 3,000 crore to buy nine projects, including the Mumbai-Nashik highway , from Gammon India, the spotlight turned to the country’s highways sector, which is being seen as a vehicle for a sharp economic turnaround.
The deal is the first of its kind in highways since the Narendra Modi government tweaked rules to spur life into the sector.
A top Singaporean firm is in talks to buy out several projects from a South India-based developer. Interest has also been shown by sovereign wealth funds and private developers from the UAE to buy completed highway projects in India. The government has also lined up 80 projects which can be sold to investors.
The sudden interest in highways has come as a boost for the government at a time when domestic investment in the sector has dried up. This also provides the government an option to fast-track the development of highways using foreign money. Experts say Indian developers will also join the fray once the rest of the problems afflicting the sector are resolved.
Once the centre of global attention owing to the spanking new highways built under Vajpayee, the sector was hit hard by a string of factors, including regulatory delays, land acquisition issues, drying up of bank finances, and a pile-up of stressed assets.
But cut back to 2015, the highways ministry has decided to tackle the issues head on.They had a tough task at hand as 73 projects involving over Rs 1 lakh crore were stalled. The decision was brutal. Projects which could not take off for years were scrapped, and the process of restructuring these stretches started. Now, the ministry has started the process of bidding out these projects, and over 4,200 kilometres have already been awarded in less than six months.
The government has also decided not to roll out highway projects until they have 80% land in their possession and all the clearances are in place. This will pave the way for faster project execution, and shuts the door on developers trying to find an excuse for cost and time overruns. In another major step, the government allowed developers to pest their entire stake in completed projects to enable them to take up fresh works. Earlier, rules mandated that the developers keep at least 24% stake in the project until the contract period ended. The easier exit rules have breathed fresh life into the sector.
More measures are lined up for the sector which the Modi-led NDA government has identified as a key driver of growth.