Bidding Models
ROADS & HIGHWAYS

Bidding Models

The evolution of road infrastructure models has become a focal point in discussions surrounding sustainable development and investment in India. Recent dialogues have highlighted the transformative shift from traditional EPC contracts to more dynamic frameworks such as BOT and HAM, underscoring the ...

The evolution of road infrastructure models has become a focal point in discussions surrounding sustainable development and investment in India. Recent dialogues have highlighted the transformative shift from traditional EPC contracts to more dynamic frameworks such as BOT and HAM, underscoring the crucial role of the National Highways Authority of India (NHAI) in fostering PPPs that are vital for the country’s infrastructure growth. At this point in time, the Ministry of Road Transport & Highways (MoRTH) and NHAI had missed their national highway construction targets in six of the past 10 years. Also, the Government is now looking to reduce its debt to `1 trillion by 2024-25. “We have NHAI, which everyone has been discussing, but it would be interesting to hear the Maharashtra State Road Development Corporation (MSRDC) perspective, given their active involvement in road projects,” said moderator Suneet Maheshwari, Chairman, Udvik Infrastructure, expressing a desire to explore NHAI’s insights on attracting Indian developers back into the sector. He opened the session by highlighting the pivotal role of NHAI and emphasised upon the importance of understanding the current landscape. HAM: Revolutionising road infrastructure “In the past 10 years, HAM has done wonders for the roads sector,” said Sandeep Upadhyay, Managing Director, Centrum Infrastructure, about the transformative impact of HAM over the past decade. “All these EPC companies, which were struggling at one point in time with respect to keeping pace in terms of raising capital, investing, taking the traffic as well as the construction risk at the same time and convincing the bankers, found the HAM model very interesting. As the name itself suggests, it’s a hybrid,” he said. Describing it as a “deferred EPC model,” he highlighted its suitability for EPC players, providing a strategic framework that allows for a 15-year operational horizon – an innovative approach that has not only facilitated investment but also streamlined the process of securing financing from banks, ultimately revitalising the sector. Balancing HAM, EPC AND BOT “Many established road developers who were taking market risks have completely vanished from this particular part of it so it is becoming more an EPC or deferred EPC game and nobody wants to take a market risk,” said Jagannarayan Padmanabhan, Senior Director and Global Head of Transport, Logistics and Mobility, CRISIL, expressing concern over the shifting dynamics in the sector. “That’s probably one of the discussion points we should have on how to bring that back and who can take that kind of a market risk. There are some people who want to take it, but the enabling environment is a lot more focused towards HAM and EPC projects. So, that’s the somewhat not-so-good aspect of HAM coming through, which has kind of edged out BOT players completely.” While the sector has seen successful projects under HAM, we must also encourage Indian bidders to take on market risks to maintain a competitive landscape, he asserted, highlighting the need for a balanced approach between EPC projects and market-risk-bearing models. Bidders, finance and equipment “I have seen the technological capacity being built up in India outside; that’s why I asked what foreign parts were there; I saw some equipment that is made in India,” said Ashish Kumar Singh, Chief General Manager of Finance, NHAI, acknowledging the increasing presence of domestically manufactured equipment, reflective of a shift towards self-reliance. He emphasised that the bidding capacity of contractors is closely linked to their financial capabilities, noting that improved financing options can add substantial value to projects. He also commended the efforts of RAHSTA for fostering collaboration and coherence within the ecosystem, which is crucial to enhance the overall effectiveness and affordability of road construction in the country. Driving Maharashtra’s infra success “Right now, we are executing `810 billion worth of projects,” said SK Survase, Chief Engineer, MSRDC, adding that a bid has been made for an additional `1,110 billion worth of projects. He revealed that there are projects valued at `1710 billion in the DPR stage, bringing the total project pipeline to an impressive `3 trillion, “for which bankers are ready to fund us.” He expressed confidence in securing funding from bankers, contingent on support from the Maharashtra government in terms of equity and bank guarantees. With a solid land bank in place, he emphasised that MSRDC is poised to continue its success in delivering these significant infrastructure projects. The way ahead The discussion focused on leveraging 98 per cent of India’s roads for infrastructure development, emphasising the shift from EPC to BOT models to enhance quality and sustainability. Even as the Government plans to add 50,000 km of high-speed corridors by 2047, the immense potential for transforming India’s road network into valuable assets can be seen from the fact that while National Highways comprise only 2 per cent of the country’s total roadways, a staggering 98 per cent of roads present untapped opportunities for monetisation and infrastructure development.

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