Govt focus on road sector yields positive results: ICRA
Government's focus on developing roads with policy initiatives like awarding projects after securing 80 per cent right of way, has revived the sector and execution pace, credit rating agency ICRA said today.
Effective policy measures over the last 36 months have revived the Indian road sector, it said.
ICRA said in a statement that the steps also include delegating the power to grant forest clearances to regional offices and online filing for clearances.
The roads sector was marred by execution delays, project cancellations, stalled projects, loss of lender confidence, leveraged balance sheets of developers and sluggish traffic growth, it said.
"Most of these measures were fully implemented by the end of FY2015 and therefore FY2016 saw a sharp pick up in execution pace by about 37 per cent, followed by 35 per cent growth in FY2017," said Shubham Jain, VP and Sector Head, Corporate Ratings, ICRA Ltd,
He said other policy measures such as back-ending premium payment, compensating concessionaires for delays not attributable to them, relaxing exit norms and one-time fund infusion by the NHAI are expected to address liquidity-related concerns faced by the developers.
Besides, ICRA said, asset sales in the road sector have picked up over the last 30 months with the relaxation in exit policy.
"Sponsors in around 20 road assets involving a total cost of Rs 123.27 billion have monetised their assets as opposed to around Rs 70 billion in the preceding 50 months. Till FY2014, projects were awarded either on BOT (Toll) or BOT (Annuity); or on the basis of engineering, procurement and construction (EPC) in that order, depending on the traffic density along the project stretch," it said.
Hybrid annuity mode (HAM) is currently the most preferred mode of awarding projects and about 53 per cent of the awards in 2016-17 by NHAI were through the HAM route, compared to 8 per cent in 2015-16, it said, adding that this is likely to increase further in 2017-18.
Till March 2017, 43 projects, covering 2,641 kms, have been awarded through the HAM (34 in 2016-17 and nine in fourth quarter of 2015-16) route.
In August 2016, the Cabinet Committee on Economic Affairs (CCEA) authorised the NHAI to monetise the public-funded National Highway (NH) projects that are operational and generating toll revenues for at least two years after the commercial operation date (COD) through the toll-operate- transfer (TOT) model.
ICRA said: "75 projects totalling 4,376 kms and estimated at Rs 356 billion, have been preliminarily identified for monetisation through TOT."
In a recent report, Reserve Bank India also said: "The resilience of some infrastructure sectors in the face of this downturn is noteworthy and brightens the outlook. First, there was a decline in cost and time overruns in central sector infrastructure projects (Rs 1.5 billion and above)." It has said awarding and construction of highway projects in the road sector reached an all-time high even as daily additions to the roads constructed touched a peak of 22.6 km during 2016-17 from 16.6 km last year.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
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