NHAI seeks flexibility in mode of project award, to focus on EPC

NEW DELHI: The National Highways Authority of India will seek approval from its board for flexibility in awarding road projects and not always go by a formula devised earlier.
When Bharatmala, the government’s flagship highway construction programme, was approved in 2017, the standard operating procedure was to award 60% of the planned roads under the hybrid annuity mode (HAM), 30% as engineering, procurement and construction (EPC) contracts and 10% as build-operate-transfer (BOT) projects.

NHAI now wants to award projects depending on market conditions, an official aware of the matter told ET. It wants to focus more on EPC mode of project construction.
“NHAI is moving the board asking for flexibility since the 60:30:10 formula is not always implementable,” the official said, asking not to be identified. “This is highly market-driven.”

Under HAM, the government provides 40% of the construction cost, while the rest is arranged by the developer. Land acquisition and toll collection are the government’s responsibilities. Private investment brought in through BOT has remained subdued over the past couple of years.

Road transport and highways minister Nitin Gadkari said in a recent interview with ET that the ministry would stick to the EPC mode, which is fully funded by the government, while awarding road projects in the current scenario, when the private sector’s ability to invest has been limited by the global slowdown.

“While we are seeking the flexibility, it will also come with a clause that these projects are monetised within, say, three years,” the official said.

The EPC mode will also boost spending, which the government is looking to get going, the official said. “There is a consensus on the idea among people across the board,” the official added.

“Looking at current market conditions, it appears sensible for NHAI to use public funds for road asset construction and simultaneously monetise existing roads with proven traffic,” said Vinayak Chatterjee, chairman of Feedback Infra. “The combination of this strategy is the most appropriate for this time.”

NHAI is moving aggressively on its asset monetisation drive through the toll-operate-transfer (TOT) mode, which has also been revisited recently by the cabinet, giving more teeth to the authority to decide on the size of packages and allowing flexibility in the concession period of these projects to attract smaller, domestic investors.