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Sadbhav Engg May Bag 110-Km National Highway Project; Beats 15 Bidders

  • Sadbhav Engineering has emerged as the best bidder for developing a 110 km national highway stretch that connects Bijapur and Sholapur in Karnataka- Maharashtra border.To develop and operate this highway stretch for 20 years, Sadbhav Engineering has offered Rs 75.6 crore of annual premium to the National Highways Authority of India (NHAI). In other words, because it has offered to give maximum premium to NHAI, it is likely to bag the project.

  • There were 16 bidders vying for the project, out of which 13 had offered to pay to NHAI various levels of premium to win the rights. The remaining three bidders had sought subsidy – called viability gap funding – from the Government to operate the project.Sadbhav will have to spend Rs 1,002.48 crore – according to Government estimates – to develop the project. The rights include designing the highway for four-lane, raising finance and spending money to develop the project, and operating it for the pre-decided concession period. In return the developer gets to keep the toll charges for the entire concession period.

GOOD FOR GOVT

  • The premium offered is good news for Government as it does not have to spend anything – except for land acquisition cost -- for creating this piece of infrastructure. For this project, Government had estimated that it will pay about 7.83 per cent of total project cost to get a private company to win the rights.

  • But companies appear to be quite eager to get this project — as indicated by the response. If there are highway stretches with high traffic density – such as those linking industrial regions – companies usually offer money to NHAI for getting the right to build and operate that stretch for a pre-determined long term concession period of about 20 years. The Finance Minister, Mr Pranab Mukherjee, made a reference to such premium bids in his budget speech.

BIDDING ACTION

  • “On March 30, bids for developing 800-900 km of highways are going to be opened. With this, the NHAI will open bids for close to 7,000 km of highways in the current fiscal,” said a source. This means, though close to this year's target, the Highway Ministry will be short of 7,300-km target.

  • Next fiscal, there will be large number of national highway development Phase-IV projects, which are in areas with low traffic densities. So, there will be lesser number of such premium bids.

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