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The Rakesh Mohan committee appointed by the finance ministry to suggest policy roadmap for the transportation industry has pegged private investment in the road sector at INR 6.65 lakh crore over the next 20 years even as the private sector investments in the road sector have dried up over the past few years. The figure translates to INR 33,250 crore in private investment annually, a tad lesser than the total value of projects awarded to under the public private partnership (PPP) route in 2010, when the government awarded projects worth INR 51,354 crore.

But since then, investment have dried up, and in 2013, the government awarded projects worth less than INR 500 crore and was forced to cancel awarding projects on the PPP mode. Experts now believe that a new government will have a major task in front of it to revive interests in the PPP model to kick start investment. A slew of policy measures, including single window clearance, foreign funding and a flexible model concession agreement, would be needed to revive private sector interest.

Private developers in the country have been staying away from road projects and have tapped foreign markets where the return on investment has been better. Additionally, many developers are also staring at distress sale of road projects since a number of road projects have not taken off and returns are expected to be slow in the coming years as the economy comes out of a slowdown.

"A single window clearance can help bring down delays that developers face. Besides, pension and insurance funds should be allowed to invest. The model concession agreement also needs to be reviewed periodically and the government should be willing to share risks with the private sector," says M Murali, Director General at the National Highway Builders Federation.

Of the INR 6.65 lakh crore, the private sector investment in the construction of National Highways is pegged at INR 4 lakh crore. The remaining investment is expected to go into expressways and state highways. The total investment requirement for road sector is pegged at INR 44.7 lakh crore.

The government is targeting to bring in private investment of INR 75,000 crore during the 12th five year plan, but the committee has suggested that "the policy of build, neglect and rebuild" needs to be broken and that the government needs to ensure that the road sector in the country is adequately given importance.

As of now, road projects worth INR 83,000 crore are pending completion. Since 2009, the United Progressive Alliance (UPA) government has recorded the completion of only three projects, adding a meagre 315 km to the existing highways' network, despite awarding a record 147 projects under the public-private-partnership (PPP) mode, with a combined value of INR 1.47 lakh crore.

"As far as foreign investors are concerned, there is the problem of insecurity of projects. The Delhi Gurgaon expressway was taken over by the government and that has sent out a wrong signal. Companies such as ours find the foreign market such as Qatar and African countries more lucrative as the return on investments have been better," said the CEO of a leading infrastructure company. A large number of developers in the country are currently plagued with massive debt and these include companies such as Gammon, GVK and GMR.

Last year, the government was forced to revise its plan to award 9,000 km of road projects, after private sector companies decided to steer clear of bidding for road projects. As many as 22 bids found no takers from the private sector, forcing the government to construct roads on the government-funded mode. "There are a host of regulatory changes that can bring about the desired change in the road sector today. Land acquisition for instance, should be made easier and companies should only be invited to bid when clearances are granted. There are also some changed as far as the concession agreement is concerned", says Vishwas Udgirkar, Senior Director at Deloitte.

Source-On Request