Road project exit norms: A final shot at revival?

The National Highway Development Programme (NHDP) was launched in 1998 for the phased development and augmentation of highways in India. The initial phases of NHDP were awarded on an engineering, procurement, construction (EPC) model basis with the government funding these projects. However, the need for greater accountability for operation and maintenance along with financing from private sources resulted in road projects being awarded on a build, operate, transfer (BOT) model under a long-term concession agreement.

Growth and stall

While significant private sector interest was generated in the sector (which resulted in various bids being awarded) we have not seen these bids being translated into on-the-ground infrastructure at the pace expected. To a large extent this is due to delays faced by the projects as a result of land acquisition issues and in some cases due to extremely aggressive bidding on low margins by the participating bidders.

This coupled with the equity lock-in restrictions imposed on the developers by the National Highways Authority of India (NHAI) meant that many project developers were not able to procure the funding for carrying out the projects, thereby stalling the implementation.

Saurabh Bhasin is a partner at Trilegal and Lzafeer Ahmad is an associate. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.