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The National Highway Authority of India (NHAI) is planning to change the model concession agreement (MCA), which specify contract rules for road projects, in a bid to achieve flexibility attuned to market conditions. NHAI is working on redrafting MCA, which will give it powers to change the bidding documents in case of projects being stuck due to various reasons, a senior official from NHAI.

Currently, the conditions specified in MCA do not allow any scope of changes or additions, which is why the government had to come up with a policy for rescheduling of premium for developers for stuck road projects and an exit policy earlier.A proposal with this regards has already been sent to the ministry of road transport and highway for necessary approvals."The purpose is to make adjustments in the project costs due to delays that happen at various approval/clearances level and steep increase in input costs. Secondly, in case of any dispute, we (NHAI) should be able to take decisions at our end rather than going to the highest level authority," another official from NHAI adds.

Due to economic slowdown over the last few years, the award of contract for national highways has slowed down. Besides issues related to environment and forest clearances, land acquisition has seen major problems.Many road projects are stalled by developers running short of cash and the government has even allowed them to reschedule the payment of premiums under a new policy.

"Seeing this situation, where many projects got stuck due to inflationary costs or delays in acquiring land or getting environmental clearances, we need to have a dynamic MCA, wherein provisions can be allowed due to changing market conditions," a senior official from ministry of road transport and highway said.

For the last few years, the projects have not been able to attract private investors, which is why it is more necessary to make changes in the existing MCA, the official added. During 2010-2012, developers had bid aggressively when the government awarded a record 147 road projects worth INR 1.47 lakh crore. That time India's economic growth was much higher but it slowed down subsequently and even the input and inflationary costs have gone up since then.

Currently, road projects worth INR 83,000 crore are pending completion. Since 2009, the United Progressive Alliance (UPA) government recorded the completion of only three projects, adding just 315 km to the existing highways' network.

Source-On request