NHAI decided to appoint external auditor to investigate cases of wide discrepancies between the NHAI-approved project cost and the bank loans taken by developers.
Allegedly banks did not practiced due diligence and lent developers loans far above the NHAI-determined cost even before land was acquired.
It is observed that the construction of highways in India is lagging behind due to various reasons. Critically discuss what are the causes delay and measures being taken by the government to address these delays. (200 Words)
Highways constitute only 2% of the total metallic roads but carry 40% of the total load. The length of highways constructed in 2014-15 reflected a marginal increase from that in 2013-14. The pace of construction has increased from 11.6 km/day to 12 km/day. Construction of highways has faced slowdown due to various reasons:
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- Delay in project awards – for the past few years only ~ 50% of projects planned were actually awarded.
- Systemic bottlenecks – land acquisition, environmental clearances, delays in procurement etc. have added to project delays.
- Issues related to dispute redressal – Over 1500 cases involving NHAI are under various stages of litigation. These add to a staggering figure of over 10k crore.
- Slowdown in core sector like cement & steel has delayed the supply of construction material.
- Companies debt ridden – Aggressive bidding during the high growth phase and subsequent slowdown has made their balance sheets highly debt ridden.
- Profit oriented private firms lost interest in stalled highways projects.
- Opaque investment policy & complex tax system has kept foreign investors aside.
- Lack of diversified source for funding has made the financier debt-ridden. Credit crunch – Banks are over leveraged, corporate bond market not sufficiently developed, public investing in gold and land rather than in equity or bond markets.
Way forward:
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- Addressing systemic delays –Recently govt. has amended norms for swifter environmental clearances for linear infra projects. Amendments to the land bill will also further this cause.
- Overhauling dispute redressal – In this regard the BK Chaturvedi Committee was constituted to design a framework for swift dispute redressal. The govt. is considering its recommendations.
- Plug-and-Play Mode – Govt. recently introduced this scheme where regulatory clearances will be assured by govt. agencies prior to awarding infra projects. So that the winning bidder could straight-away get to implementation.
- Mobilizing resources – Govt. has taken adequate steps in mobilizing resources. Institutionalizing savings through JDY, KVPs etc. Gold monetization scheme is also a step in this direction.
- Expanding the corporate bond market – Since long-term financing is required bank lending has limited capacity. Thus the corporate bond market must be deepened & expanded.
- Instruments such as Infrastructure investment trust for long term credit.
- Public awareness to diversify savings from gold to capital markets.
- Emphasis on EPC rather than BOT.
- Exit policy to allow companies easy exit.
- Hybrid annuity model – This has been introduced to re-allocate risk sharing between public & private parties