Hate bad roads? Modi government hints at relief, but there is a catch

The Union Ministry of Road Transport and Highways is unlikely to take a decision soon to reduce minimum land acquisition before bidding out a road project. The proposal is to reduce mandatory land acquisition requirement while starting the project to 50% from the present 80%. Minister of Road Transport and Highways Nitin Gadkari told DNA Money that there is a plan to reduce the threshold limit. “But no decision on the proposal will be taken for now,” Gadkari said.

In August this year, DNA Money had reported that Union government plan to reduce mandatory land acquisition threshold limit before commencing a national highway project will boost the pace of awarding of contracts. At the same time, it may also increase the total number of stuck projects apart from the funding challenges that may follow suit.

This proposal had also drawn cautious responses from industry players as well as analysts who felt that there will be an uptick in the number of projects, given the need to achieve the target by awarding road contracts under the ambitious Bharatmala Programme, but may bring back the same set of issues due to which the projects had got stalled during the earlier years.

“Lesser land available for more complex project would mean more road developers preferring to stay away from participating in the bidding process,” an analyst had said.

Already, most of the developers have a good number of road projects in their order-books that they are working to complete, and the latest proposal may result in a much more cautious approach by them while bidding for the project.

Secondly, they have been facing a slowdown in arranging for funds to finance their respective projects. Lowering the threshold limit would only increase the challenges for road construction companies.

Recently, Gadkari had spoken about slowdown in road financing. The bankers who have reservations in financing road projects, are willing to fund road projects being bid out under

Engineering, Procurement and Construction (EPC) mode.

If financing slows down further, the Union highways ministry will have to move towards EPC from the ongoing hybrid annuity model projects.

Source: DNA Money