The tepid response to NHAI's bids for the rights to collect tolls from the toll plazas of public-funded stretches reflects the current economic scenario in the country, observes AHLAM RAIS.
The latest bids of the National Highway Authority of India (NHAI) for the rights to collect tolls from the toll plazas of public-funded stretches have witnessed a slowdown. A total of 22 stretches was put on auction by NHAI and as of January 6, 2014, only 36 applicants have bid for these stretches. These include Ashoka Buildcon, MEP Infrastructure Developers, Eagle Infra India, Ayushajay Construction, etc. All the applicants have been prequalified except for two - Rajiv Kumar Singh and Pradeep MS - that are still under evaluation.
In mid-December, only six highways had received better offers as compared to the previous year. It comprised five highways in Uttar Pradesh - alemgarh toll plaza (Rs 16.2 crore), Semri at 140.4 km of Jhansi-Pooch section (Rs 31.3 crore), AIT at Pooch-orai section (Rs 33.1 crore), Badauri of Chakeri-Usraina (Rs 55.09 crore), Allahabad Bypass at Sihori Uparhar, Adampur, Rajapur Maksudan, Bhopatpur and Sujaula on NH-2 (Rs 85.41 crore); and one in Andhra Pradesh - Kalaparu-Gondugolanu-Vijayawada-including the Eluru bypass (Rs 22.11 crore). However, M Murali, Director General, National Highways Builders Federation, disagrees when he says, "It is not appropriate to say that only a few projects have received better bids. If you compare the previous year with this year, there are two to three factors that need to be considered such as economic recession, actual cost and projection of traffic. These factors are unpredictable.
One per cent of the GDP growth amounts to 1.1 per cent of the traffic road. Hence, all these factors are interlinked. This year, issues such as economic recession and political instability exist. Bankers are also not willing to provide loans." The process of bidding required a firm to quote a fixed amount of money to NHAI in order to obtain the rights to collect tolls for a period of one year from road users using a particular national highway stretch, which could have one or more toll plazas.
Profitability at stake
About the decline in the number of bidders, Satish D Parakh, Managing Director, Ashoka Buildcon, says, "There has been a decline in traffic by 3-5 per cent. This fact will affect the profitability of bidders, which is why they are not coming forward to bid for such projects." Mining bans have also played a vital role behind bidders shying away from national highways. To this, Murali adds, "The decline has been due to various reasons such as lack of financing, low GDP growth and inflation."
However, bidding for the Kognoli Toll Plaza at the Maharashtra border-Belgaum in Karnataka for which he has received an Letter of Acceptance (LoA) for contract value of Rs 24 crore is an optimistic move by Parakh. He says, "In the future, if we are bidding for a BOT for a toll plaza, we will get a good sense of the traffic in the region and we will take this as an opportunity. By collecting toll revenues, we will also have data on the basis of which we can forecast our future opportunities."
Better performing sectors
The general opinion is that sectors such as power and road are now performing better than other sectors. However, Murali avers, "People from other sectors are also entering the road sector. If they have surplus cash, they invest it in these road projects but it's only when they enter the sector they get to know about the ground realities."
Economic slowdown along with delay in policy decisions have acted as speed breakers in India's growth chart. The government should take effective actions to resolve the issues in order to offer diverse business opportunities for toll plazas in future.
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