High­way con­trac­tors pre­fer gov­ern­ment funded projects

Commercial Vehicle - - NEWS / CV MONITOR -

Ea­ger to place bids for projects based on the en­gi­neer­ing­pro­cure­ment-con­struc­tion (EPC) model, about 60 in­fra­struc­ture de­vel­op­ment com­pa­nies have ap­plied for pre-qual­i­fi­ca­tion. The projects are expected to be built through 100 per­cent gov­ern­ment fund­ing, in­clude eight projects in Ra­jasthan and some ad­di­tional ones in Ut­tar Pradesh. The eight Ra­jasthan projects are es­ti­mated to be worth be­tween Rs 200-500 crore apiece. But, the profit mar­gins for the con­trac­tors is expected to be a max­i­mum of 10 per­cent, but, de­spite this mat­ter, large con­trac­tors like L&T, GMR and Gam­mon have ap­plied for pre-qual­i­fi­ca­tion. This is be­cause they pre­fer gov­ern­ment funded projects as it elim­i­nates the has­sle of rais­ing loans from banks and ap­ply­ing for clear­ances. Se­cur­ing loans for the BOT model has be­come dif­fi­cult, more so as in­ter­est rates have soared from 8.5 per­cent to 15 per­cent and bank­ing au­thor­i­ties have be­come cau­tious in lend­ing. There­fore, the con­trac­tors feel that get­ting more than Rs 2 lakh crore in credit to com­plete 7,500 km of high­ways will be dif­fi­cult.

How­ever, NHAI is con­fi­dent that the BOT model will continue to work and will not have to be shelved com­pletely. Re­cently, NHAI re­ceived bids for two toll nakas to be con­structed on the BOT model af­ter a lull of six months, sig­nalling a pick-up in the seg­ment. Also, four-lan­ing of the Salasar-Haryana bor­der project, a to­tal stretch of 154 km es­ti­mated to cost Rs 601 crore has been given clear­ance. One of the bid­ders quoted a 27 per­cent VGF, much lower than the gov­ern­ment’s cap of 33 per­cent. Though big play­ers are lean­ing to­wards EPC, the min­istry is hope­ful of the trend chang­ing to BOT as greater risk also sig­ni­fies greater prof­its.

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