India's Roads & Highways:
|
|
 Mahesh Koirala,
CFO - Atlanta Ltd.
|
|
Over the last few years, the
Indian economy has been in
a phase of unparalleled
growth of about 8-10 per cent per year,
making it one of the fastest growing
economies in the world.
The high GDP growth has led growth in
individual incomes as the data suggests
that the rate of domestic savings grew
and the per capita income has shot up
from just $300 levels to approximately
$1,700 levels in the two decades, since
the beginning of economic
liberalization in India.
However, the momentum of economic
growth could come to a halt unless our
country strengthens infrastructure. In
this regard, roads and highways are the
veins and arteries of a nation. Sustaining around 8 per cent rate of
growth will need huge investments in
physical infrastructure such as roads
and highways. I am not much
impressed with the recent performance
of the Indian infrastructure sector
relative to what we actually need.
Despite years of economic boom,
India's infrastructure is wobbly and its
manufacturing sector sluggish.
Transporting goods is expensive and
slow -- it can take more than two
weeks to move a container from Delhi
to Mumbai.
Investment in infrastructure in a country
of India's size is relatively low (~7.5 per
cent of GDP) and is much lower if we
compare with some other countries in
Asia. The 11th Five Year Plan has fallen short of its targeted spend, which has
given way to an imperative need to
increase speed of government
investments in the infrastructure sector.
One solace is the news that the
construction of highways, which had
dipped to dismal levels in the past few
years, has picked up pace and official
data shows that 11 km of roads are
being added every day. If the trend is
sustained, the government could well
be on track of achieving 20 km per day,
which Kamal Nath had over ambitiously
projected, immediately after taking
charge of the ministry.
The government plans to increase the
share of infrastructure spending as a
percentage of GDP to 9 per cent by the
end of the 11th Five Year Plan. In the 12th Five Year Plan, it has projected
investment of around Rs 1.2 trillion for
the infrastructure segment, involving
significant private sector participation.
However, rigid commodity price
inflation, hardening of interest rates
and slow growth in government
investments owing to growing fiscal
deficit can impact spending on
infrastructure.
But, even the government has sensed
the need for infrastructure
development and its focus on private
sector participation for the
infrastructure development are clearly
demonstrated by the steady escalation
in road infrastructure projects. I foresee
a fair amount of bidding in the coming
years. The bid pipeline is significant
with projects worth around Rs 900,00
crore, comprising approximately 13,000
kms. These projects include both NHAI
projects and State Government
projects.
The ambitious plan to build a vast
network of rural roads, hit by delays
linked to a shortage of funds, is going
the highways path. The government is planning to throw it open to the private
sector under a public-privatepartnership
(PPP) model that would
bring in investments on the one hand
and assure reasonable returns to
entrepreneurs on the other.
The Pradhan Mantri Gram Sadak Yojana
(PMGSY), which connects far-flung
villages through all-weather roads to help
farmers and agricultural trade, will likely
take a leaf out of the National Highway
Development Programme (NHDPs).
As rural roads are unlikely to be run on
revenues levied through toll charges, the government is considering annuitybased
schemes to incentivize private
parties to invest in these. Under such
schemes, private developers are
empowered to design, finance, build
and maintain the roads in a model,
where the government is contractually
obliged to pay them on an annualised
basis after the project's completion.
In the current fiscal year (2011-12) an
outlay of Rs 20,000 crore has been
allocated for construction of rural roads.
Spread across seven phases, the NHDP
includes the up-gradation of more than
50,000 km of National Highways. The
NHAI proposes to award projects for
two/four/six-laning of national
highways (10,000 km) over a period of
one year.
|
"Mahesh Koirala" is the present CFO of Mumbai-based
infrastructure company, Atlanta Limited. Since January
2011, he has been a part of the growth and success of
Rs 2,840 million company that is engaged in the
construction and development of various infrastructure
projects, such as toll-based public private partnership
development; engineering, procurement, and
construction projects such as roads, highways, bridges,
runways, docks, ports, canals, water courses, irrigation, embankment, and reservoirs.
|
|
|
Meeting the high demand would only
be possible if many large construction
companies diversify into the road
sector and foreign construction
companies also participate in a
substantial manner. This increase in
demand would offer an opportunity
for innovative arrangements like
hiving off independent public sector
construction companies from the state
road administration organizations
(public works departments). Further,
as more and more large BOT projects
are being mooted in the road sector, in
the near future, the country will also
need to seriously promote
participation of very large
conglomerates/joint ventures to
deliver contracts of huge sizes.
Recent change in Land Acquisition Policy
may be an obstacle in road and highway
development in the country.
|