- Nitin Gadkari, Union Minister of Road Transport and Highways, Government of India
Availabilty of funds and right of way were major concerns for the road sector. However, while tweaking the mechanism (introducing hybrid and annuity) and changing the approach (focusing on EPC), the Government has somehow managed to bring back the confidence of investors. In an interview, Union Minister of Road Transport and Highways Nitin Gadkari shares his ministry´s achievements and upcoming plans.
Kindly share your achievements in the roads sector over the past year. Also, what´s next for the sector?
In the past year, the Ministry of Road Transport and Highways has drastically brought down stress project count to 41 from 384 projects worth Rs 3.80 lakh crore. Since May 2014, the Cabinet has taken 21 decisions whereby only seven projects worth Rs 20,000 core stand stressed. In addition, the government has already signed contracts worth Rs 1.50 lakh crore, which will increase demand for cement and steel after April 2016. Also, in the next three months, we will increase the length of our National Highways from the present 96,000 km to 1.52 lakh km, and try our best to reach 2 lakh km thereafter.
Specifically for Maharashtra, the Centre is planning to invest Rs 3 lakh crore, which will change the basic infrastructure of the state completely. Around Rs 68,000 crore of road projects will be completed in the state by December 2016. Meanwhile, we are also working on policies for developing transport hubs using 350 ring roads, developing 14,000 km of coastal roads, and introducing e-tolling across 360 toll plazas. A company of two banks and a government undertaking has been formed for the purpose of e-toll collection.
Considering your plans for the roads sector, which is crossing around Rs 10 lakh crore, do banks seem encouraged to fund projects in India?
Why will banks not fund road projects? To be precise, there is no dearth of funds in the country. Let me reveal that we have already received permission from the Centre to raise Rs 70,000 crore via tax-free bonds. Also, we are in the process of scrutinising around 101 projects where we are going to secure funds worth more than Rs 70,000 crore.
What is the likely expenditure on roads in the coming fiscal? What is the money that the government has allotted for this sector?
At present, money is not an issue in rolling out the project, but issues relating to the system need to be speedily sorted. We are expecting a budgetary allocation of around Rs 65,000 crore for the transport sector from the present Rs 45,000 crore.
How are you addressing the issue of right of way?
Most stalled projects cleared in the past year were stuck due to right of way or, in layman´s language, land acquisition. At present, there are quite a few stalled projects that are subjudice, on which I cannot comment. For this purpose, I have requested the NHAI chairman, along with the road secretary, to visit every state in India to take stock of all the projects stalled owing to this. But to address the issue, we have the best mode: The hybrid mode. Most important, we have changed our approach towards the roads sector.
Is it a change in approach or a change in mechanism? Because, in the past year, most roads projects were based on EPC....
At this point of time, we are focusing on EPC-based projects. And, the reason is that in the past couple of years, the economic health of road developers and contractors who had already invested in the sector was deteriorating. Now, with EPC projects, it will somehow help road contractors come out of the economic slumber. Owing to this approach, contractors can re-enter the sector. The change is visible as some road contractors have started posting positive quarterly results.
In the meantime, we have also introduced projects in the hybrid and annuity mode. The ministry is expected to roll out around 28 hybrid projects before March, of which we have already started working on six projects. In the hybrid model, the Centre has a commitment to aid 40 per cent of the funding requirement, along with land acquisition and environmental permissions, utilities shifting, and regulatory clearance. Through the hybrid model, we will give a complete project to investors in terms of regulatory permissions. The investor must bring in the remaining 60 per cent of investment, of which 30 per cent will be through promoters (raised from the equity market) and the remaining 30 per cent via bank loans.
We have also launched projects based on the annuity mode, where the government will give 3 per cent guaranteed benefits (return on investment). In fact, we are receiving a good response for annuity-based projects, which will infuse more investments in the sector.
So, we have changed the approach by tweaking some mechanisms. As far as BOT projects are concerned, unless we think these projects are financially viable to put on the block, we will not bid out. To give some ballpark figures, the government, till now has sanctioned only nine BOT projects.
You also have plans to build logistic hubs-..
The objective of constructing logistic hubs was to reduce the logistic cost, which is 18 per cent of the total.
It was 8 per cent in China and 8-10 per cent in European countries. The proposed logistic hub, spread over 2,000 to 3,000 acre, will house godowns, storages, pre-cooling centres, cold storages and residential units along with 350 ring roads.
Finally, what are plans for the future?
Apart from constructing National Highways, we are also focusing on converting two-lane roads to four, where the vehicle traffic is more than 10,000 daily. Similarly, we have plans to convert four-lane roads to six. On the express highway front, we are likely to start the Vadodara-Mumbai express highway projects on the lines of the Mumbai-Pune Expressway. We have already completed the Ahmedabad-Vadodara stretch. To add more southern connectivity, we are working on expressway projects, including stretches such as the Hyderabad-Amravati, Amravati-Bengaluru, Hyderabad-Bengaluru and Chennai-Bengaluru. For northern connectivity, we have already started work on the Delhi-Meerut project. Also, an expressway project will come up on the Kanpur-Lucknow stretch, which is an eight-lane road project. We have already started a feasibility study on the same.