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Big Push Awaits Highways Development

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Even as the government scouts for money to fund the construction and completion of various ongoing national highways project, around Rs 25,400 crore in 112 cases are pending under arbitration between the National Highways Authority of India (NHAI) and the contractors and concessionaires. In order to resolve the pending matters, the NHAI has set up a high level Independent Settlement Advisory Committee (ISAC) headed by a former Justice of the Delhi High Court, the ministry has informed the Parliament.
 
Some of the examples of cases under arbitration includes the six laning of Panipat-Jalandhar Section of NH-1 (from 96 km to 387.1 km in Haryana and Punjab) where the contractor has claimed an amount of Rs 5,753 crore whereas NHAI has claimed the project amount at Rs 1,565 crore. A senior official said out of Rs 25,400 crore under arbitration, Rs 19,500 crore is being claimed by the contractors and concessionaires whereas the balance was being claimed by the NHAI.
 
In order to expedite the completion of national highways, the roads ministry has also initiated talks with the Employees Provident Fund Office (EPFO) which has a corpus of over Rs 3 lakh crore. As per the ministry's submissions before the Lok Sabha, NHAI needs to borrow Rs 1.8 lakh crore in 2015-16 to build around 20,000 kilometres of national highway. 
 
Sources said the EPFO's annual investments are around Rs 1 lakh crore. But as the NHAI does not have a net worth, the provident fund body wants a government guarantee before it invests any money in roads projects. "The finance ministry have to look into the details of this matter," an official in the knowhow of things said.
 
NHAI is expected to issue bonds of AAA ratings in order to please EPFO, sources said.
 
Apart from raising funds, the ministry is also looking at new variants of Public-Private Partnership (PPP) model like Hybrid Annuity Model to attract bidders for new projects, said a senior official in the ministry. Under the proposed hybrid model, the developer will need to shell out only 60 per cent of the total project cost with balance contribution coming from the Government. The Government will pay the developer a biannual annuity to recover its investment, interest costs and fee. Collection of toll will be the prerogative of the government under this model, sources said. This is different from the current model of Build Operate Transfer, it is the developer who invests money, takes risks and is responsible for maintenance of the road for a stipulated period of time.
 
According to officials in the roads ministry, the NHAI is also auctioning certain stretches of highways constructed under the Engineering Procurement Construction (EPC) and BOT mode to expedite the development of highways.
 
ashish.sinha@businessworld.in


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