Early signs of execution snags hit Nitin Gadkari’s road ministry

The National Highways Authority of India (NHAI)’s project awarding activity touched a new high in the last financial year. While the awarding activity looks impressive, the ministry may be struggling with fresh reports of delays.

In its data shared with the Lok Sabha in March, the road ministry said 107 of its road projects are facing delays and has or will miss the original completion date. Most of these projects were awarded prior to May 2014 when the new government came to power.

However, around 19 of these 107 projects are such which were awarded in or after May 2014.

A closer look at the data shows, these 19 projects were awarded between May 2014 and August 2016. The average completion time period as per contract for any road project is between two to three years, in some cases extending to four years depending on the length of the road and nature of the work involved.

Between 2011- 2014, a number of road projects in the country suffered owing to delays in various approvals and land acquisition issues. Under Nitin Gadkari’s leadership, post-Bharatiya Janta Party (BJP)’s win in May 2014, the road ministry worked on easing out these issues before putting projects up for bidding.

“The reason could be the old reasons or new ones like developer community’s capability being the issue. The understanding was that projects were being given out only after land acquisition and other approvals are in place. If there is still a delay it means either some projects initially got awarded without fully adhering to this or the reasons are beyond land acquisition like execution capability of the contractor,” said Manish Agarwal, Leader-capital projects and infrastructure at PricewaterhouseCoopers India.

The road ministry has not explained the reason for delays for any of the 107 projects in its response to the Lok Sabha.

Certain others blame the delay on the execution flaws of sponsors who bid aggressively. “Some of the projects awarded in 2014-2015 went to weak sponsors, those are facing issues. However, projects awarded over the last two years, the execution is expected to be better. Even in the hybrid annuity model ( HAM) model, some of the early projects which went to weak sponsors may face the same issue,” said an official with a rating agency, who did not wish to be identified.

Last financial year, NHAI awarded 7,400 km of road projects, valued at Rs 1.2 trillion, which is an all-time high. Agarwal from PWC has a word of caution on the aggressive awarding activity. “In general we know that the delivery capability of the developer community is getting stretched at present. As volumes increased, we have not seen the delivery capability in terms of execution move up in tandem,” he said.

The government would, however, need to watch out if the gap between the speed of awards and execution capability of companies leads to more delayed projects.

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