The EPC module for road development is best fitted for today’s time, says Arun Karambelkar – President & CEO, Hindustan Construction Company
Arun Karambelkar – President & CEO, Hindustan Construction Company (HCC) shares his views on the key developments and future of the Roads & highways sector in the country with Garima Pant
What will the increased budgetary allocation mean for the roads & highways sector and the infrastructure sector at large?
The government in its Union Budget on 1st February 2017 announced an allocation of Rs. 64,900 crore for the construction of national highways for fiscal year 2017-18, up from about Rs. 58,000 crore for FY 2016-17. Road sector accounts for a significant portion of turnover and order books of over 30 EPC companies. Hence this move is going to be very beneficial for EPC companies focusing on construction of Infrastructure projects, particularly highways.
How can the players and the government address road-safety concerns?
There are various reasons why accidents happen on roads. The majority of the accidents happen due to driver’s mistakes - for over-speeding, lack of lane discipline, inadequate training, drunk driving or using mobile phone while driving. As far as safe infrastructure is concerned, the quality of road construction has improved over the years and today they are built to more stringent specifications and under the supervision of an independent engineer. However, government should make sure that separate lanes for both way traffic are planned on all roads including the city interior and rural areas. In the hilly terrain, the roads must have adequate width to support two-way traffic and safety features such as slope stabilizations to avoid slips, rectification of black spots should be implemented. Besides, government should strictly enforce lane discipline, street lighting and proper driver training.
Which are the key projects that are drawing interest and investment across the country? How the various national schemes launched in the segment are helping the sector to grow?
There are three national projects, which are being currently implemented in highways sector. The first and foremost is the National Highways Development Program worth Rs.16,26,875 crore to be implemented over next five years. Under this programme 50,000 km of National highways would be 4/6 laned, 1000 km of expressways would be constructed across India and an interconnected highway grid will be formed to connect 27 vertical and horizontal highways to improve inter regional connectivity.
Bharatmala Pariyojana is the second program being undertaken approximately worth Rs. 2,67,000 crore over next 5 years, which deals with road connectivity of around 23,000 km including coastal / border areas, backward areas, religious places, tourist places, construction / rehabilitation / widening of about 1,500 major bridges and 200 railway over bridges (ROBs) / railway under bridges (RUBs) on national highways, improvement of newly declared national highways providing connectivity to district headquarters.
The Special Accelerated Road Development Programme in North East (SARDP-NE), Phase B covers development of 3,723 km roads worth Rs. 20,000 crore over next 5 years, which include 1,285km of national highways and 2,438km of state roads.
These three programs put together offer a lot of opportunities for highway construction across India.
With a spate of reforms in the Roads & Highways sector, which of the models – EPC, BOT & HAM – would be a better choice and why?
The EPC module for road development is best fitted for today’s time as the government is always in a position to borrow funds at much lower interest cost compared to private players. Most of the private infrastructure players are highly leveraged with stretched balance sheets and banks with their previous experience of the infrastructure sector are not willing to support BOT/HAM projects.
Do you believe the Hybrid Annuity Model (HAM) would be able to rejuvenate PPP in the sector?
In last two years, the government announced 47 projects under Hybrid Annuity Model (HAM) out of which only 13 projects could achieve the financial closure. Some of the underlying issues, which affected the implementation of PPP projects, are continuing to haunt HAM projects also. A number of small regional contractors with limited capacity have entered the fray through HAM projects. The traditional lender like banks does not seem to have infrastructure sector on their priority. Banks are also hesitant to lend to companies with weak balance sheets or to companies with no adequate experience.