Where Gadkari made progress was on some of his other main promises: getting more private investment into the sector through his ‘brainchild’, the hybrid-annuity model, attracting greater private participation in road-making, and making land acquisition easier. These factors allowed his ministry to award and execute a large number of highway projects.
The result: 27 km of roads were built per day in 2017-2018. This was lower than Gadkari’s target of 41 km but better, say experts, than under the UPA government.
According to the ministry, one of the prime reasons for the 27 km per day was its success in making the process of acquiring land for highways easier through the simple expedient of offering more compensation. A significant number of states came forward to have land notified for building national highways.
“In 2017-18, there were 1,000 notifications for land acquisition and by the end of FY19, it will be 2,500,” former road secretary Y.S. Malik told Business Standard.
The Eastern Peripheral Expressway on the outskirts of Delhi connecting Kundli to Palwal in Haryana via Ghaziabad, bypassing Delhi, is a prime example of higher levels of compensation for land.
The Union government claimed that it was the country’s first infrastructure project where the land acquisition cost of Rs 5,900 crore was actually higher than the project cost of Rs 4,418 crore.
Under the hybrid annuity model, introduced in 2016, the government arranged about 40 per cent of the project cost, allowing construction companies to get started fast on road building without having to struggle with fund-raising.
The model also meant that medium-sized companies, instead of the usual large infrastructure companies, could bid for the projects - and they did, coming on board as Engineering, Procurement and Construction (EPC) contractors.
These EPC projects, fully or partially funded by the government, were awarded after the land acquisition was complete. In this way, the government did not need any other agency to executive these projects.
“The first couple of years were spent ironing out shortcomings of the previous road programmes. Later, implementation of projects took centrestage. It’s only the last year that has been slow from both the award and execution point of view,” said an industry expert who did not wish to be named.
Later, the ministry focused on monetize these EPC contracts by bidding them out as O&M or operation and maintenance contracts to the entities who had expertise in maintenance of such contracts. This would allow the government to recover the money it had spent on the execution of these projects and build more highways projects on an EPC basis or invest in the hybrid-annuity contracts.
These EPC projects were then tendered under the road monetization scheme. One such project was won by the Australia-based Macquarie group Macquarie at a premium last year. The joint venture between Macquarie and Ashoka Buildcon won the first batch of toll-operate-transfer (or TOT) projects from the National Highways Authority of India (NHAI). The bid price for the project was Rs 9,681 crore, against the NHAI expectation of Rs 6,258 crore.
(Under the TOT model, the concessionaire pays a one-time concession fee upfront which then enables the concessionaire to operate and toll the project stretch for the predetermined 30-year concession period).
Experts feel that if the five years gone by were the years of land acquisition and hybrid-annuity projects, the next five years will be about road monetisation.