Private role in Bharatmala project doubtful due to stressed assets

MUMBAI: Owing to the stressed balance sheets of many infrastructure developers, the participation from the private sector for the government's ambitious Bharatmala project seems challenging, says India Ratings (Ind-ra).

For the Bharatmala Pariyojana project, the second biggest highway development programme after the National Highways Development Programme (NHDP), the government expects private participation through public private partnership of about Rs 1.06 trillion.

"Private participation could be challenging due to the continued stretched balance sheets of many infrastructure developers," Ind-ra said in a statement issued here on Monday. The agency believes the implementation of Bharatmala would depend on fast tracking of land acquisitions, clearances from the Ministry of Environment, Forest and Climate Change and other clearances.

"Timely redressal of dispute by establishing a regulator is also crucial before undertaking such a large scale project because of possible arbitration issues," it said.

As per NHAI, the government constructed national highways of 8,231 km in FY17 against the set target of 15,000 km at 22.55 kms per day against the target of about 40 km owing to delays in land acquisition and other statutory framework. However, the pace of construction picked up to 25.21 km per day during April-june of FY18.

"A slew of measures such as enhancement of approval limit of projects by the NHAI to Rs 2,000 crore from Rs 1,000 crore, increase in compensation rates to farmers under the new land acquisition policy and digitalisation of land acquisitions would expedite projects under Bharatmala," Ind-ra said.

Since most of the projects are to be constructed in remote areas, mobilisation of equipment and raw materials would be challenging, it opined. "The government announced to construct about 83,677 kms of roads or nearly 45 km per day, including Bharatmala over the next five years. This would require vast improvement in pre-bidding completion procedures to bring the project until the bidding stage," Ind-ra said.

The programme will incur a capex of Rs 6.92 trillion; of this Phase-1 of Bharatmala will incur capex of Rs 5.35 trillion.

Some of the major issues of the projects awarded through public private partnership under NHDP phases were delay in land acquisitions and obtaining statutory approvals and clearances, aggressive bidding and difficulties in forecasting traffic volumes which led to a decline in private sector participation in the road sector.

Ind-ra opines that majority of Bharatmala would be delegated through engineering, procurement and construction (EPC) mode.