The National Highways Authority of India (NHAI) has bid out a total of 1,500 km in March, taking the total length of projects awarded by them till date to 4,000 km in this fiscal. NHAI chairman Deepak Kumar told a television channel on Tuesday that another 4,000 km would be awarded in the next three weeks. With this, the total length of projects bid out could scale 8,000 km this fiscal - lower than the target of 10,000 km NHAI had set for itself for the year but higher than the 4,335 km awarded in the last financial year. The target of 10,000 km set for this year was lower than the target of 15,000 km set for FY17. In the last five years, NHAI has awarded an average of 2,860 km per year, according to a note by the Press Information Bureau (PIB). NHAI's bidding calendar this month is a busy one with projects being awarded every other day, with the authority hoping to get close to its set target.
However, Alok Deora, an analyst with IIFL Wealth, said NHAI would likely end the year with a total length of 6,500 km awarded. "The task of awarding 4,000 km in three weeks is too much to do in too little time, and it will spill over to the next year," he said. According to sources, the ministry of road transport and highways (MoRTH) may award 5,500 km this fiscal, taking the total length of road projects awarded this year to 12,000 km, including NHAI's 6,500 km, much lower than the total of 16,000 km awarded in FY17.
Union minister for road transport & highways, shipping and river development Nitin Gadkari was hoping to bid out contracts for 25,000 km in 2017-18. According to analysts, the roll-out of the goods and services tax (GST) in July 2017 stalled the preparation of the DPRs (detailed project reports) of road developers since the tax implication of the new indirect tax levy needed to be penciled in while working out the costs. This caused a lull in projects awarded between July and December. Earlier, Varun Mehta, CFO, Sadbhav Infrastructure Project, pointed out that originally, GST was levied on road contracts at 18%, which, after input tax credit, resulted in a tax burden of 10-11% higher than the 4-5% in the pre-GST era. "Now, with GST at 12%, the effective tax on the contracts is back to the pre-GST era, so contractors are comfortable bidding," he said.
Bidding picked up after October when it was clarified there would be no GST on annuity projects. Land acquisition, too, has remained a difficult and a time-consuming process. Satish Parakh, managing director, Ashoka Buildcon, said since projects are not being awarded without 90% land having been acquired in the case of EPC projects and 80% for HAM projects, there has been some delay.
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The Financial Express