Projects be­ing awarded at lower than re­serve prices

Up­swing in in­vestors’ in­ter­est in en­gi­neer­ing-pro­cure­ment-con­struc­tion projects

Business Standard - - ECONOMY & FINANCE - MEGHA MANCHANDA

There has been an up­swing in in­vestors’ in­ter­est in en­gi­neer­ing-pro­cure­ment-con­struc­tion (EPC) projects.

They have bagged 80 per cent of those ten­dered last year by quot­ing rates lower than the re­serve price.

These projects are ex­pected to be com­pleted in time be­cause the clear­ances are in place. In­vestors are in­ter­ested be­cause the el­i­gi­bil­ity thresh­old to bid for such con­tracts has been low­ered. The Union road trans­port and high­ways min­istry had in Jan­uary last year re­laxed the el­i­gi­bil­ity cri­te­ria re­quired to bid for them. For in­stance, be­fore Jan­uary 2017, a com­pany that wanted to bid for a ~10-bil­lion con­tract was re­quired to have fin­ished jobs worth ~5 bil­lion.

Now a com­pany that has fin­ished jobs worth ~2.5 bil­lion qual­i­fies to par­tic­i­pate.

“Mid- and small-sized com­pa­nies are el­i­gi­ble to par­tic­i­pate in the ten­der, thereby widen­ing the pool of in­vestors,” a se­nior min­istry of­fi­cial told Busi­ness Stan­dard. Ear­lier, large con­trac­tors bagged these con­tracts at a premium and em­ployed small-sized com­pa­nies as sub-con­trac­tors to fin­ish them.

“With the new sys­tem in place, the mar­gins have de­clined for mid-sized con­trac­tors

and they can bag these projects as pri­mary con­trac­tors,” an of­fi­cial said.

“There is a merit in what the gov­ern­ment is say­ing. With the in­creased pace and amount of con­struc­tion, and sig­nif­i­cantly higher tar­gets to achieve, work will get sub-con­tracted,” said Puneet Narang, part­ner, Ma­jor Projects Ad­vi­sory, KPMG In­dia. He adds the fo­cus should be on three things — easing pres­sure on in­cum­bents, free work front,

and en­sur­ing that the projects de­ploy skilled sub-con­trac­tors and a trained work­force, besides strong project gov­er­nance, plan­ning and con­trols.

In 2017-18, the Na­tional High­ways Au­thor­ity of In­dia (NHAI) awarded 150 road projects for 7,400 km and worth ~1,220 bil­lion. In the last five years, the av­er­age length of projects awarded by the NHAI has been 2,860 km, with 4,335 km awarded in the last fi­nan­cial year.

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