At a time when the government is trying to get stalled projects in the road sector moving, Road Transport and Highways Secretary Vijay Chhibber speaks to The Hindu on the problems plaguing the sector and their causes
A recent Crisil report said that 53 per cent of BOT (build, operate, transfer) road projects are under risk. The government is doing lots to make stalled projects move forward, but what about the issue of projects at risk of not being completed?
Why did the banks release so much money? They have not done proper diligence. The developers do not have a problem. They have taken their money out of the projects, the banks are the ones in trouble. And as tax payers we are asked to recaptialise the banks. It is a scam. The way the banks have been happily over-lending to this sector, far above what was assessed by the NHAI. That is something which needs to be looked at. Why do you want government to bail out these banks? That way, anybody will get into an enterprise, suffer losses and say the government should bail us out. Where is the risk?
The report said that most of the tenders were between 2010 and 2012. So, was there a bubble at that point?
There was a bubble because the banks would give developers money before even the land was made available. Certainly the banks have a lot of explaining to do. Because it wasn’t just that they allowed funding to happen to these projects which were not yet ready for construction but they agreed to costs and TPCs (total project costs) much higher than what the NHAI had assessed. Effectively, the developers never brought in their money, the equity was paid for by the banks. My complaint is that the banks have killed this sector, it’s not the other way round.
They would keep saying that your TPC is not accurate because of delays, etc. Even if there is a few years’ delay, it cannot explain a 100 per cent increase in cost. At best, there will be a 10-20 per cent increase. But you see, in a portfolio of 70 projects, only five see a 20 per cent increase. The rest are all 70-80 per cent, even 100 per cent increases! How can NHAI, which is a professional road construction company, assess a project at Rs.1,000 crore and you are saying the cost is Rs.2,000 crore?
Do you see something like this happening again? Because banks are being recapitalised and the investor sentiment is again growing.
It is difficult. Learning from these experiences, we have tried to rejig the whole thing. We are saying we won’t fix the TPC. The bidding parameter is the TPC. So if you become L1, you have determined the project cost yourself. Therefore, you can’t now go to the bank and say this is NHAI’s TPC but they are wrong, give me 30 per cent more. Then there is no excuse. There has been a happy collusion taking place.
Another point raised is that sponsors are not getting their money back because there is less than estimated toll revenue due to lower traffic than was forecast.
It was less for a while, it has gone up again.
If the push towards shipping, as Mr. Gadkari has been saying will happen, means that more and more cargo will be shipped instead of being transported by road…
It’s not happening. In fact, the over-dependence on road is continuing to grow. A 70 per cent share of cargo five years ago has now become 72-75 per cent. An 85 per cent passenger share is now coming close to 90 per cent. I wish it would go that way (towards shipping) because it is the right way to go.
But then wouldn’t that further affect the toll revenue? If more cargo starts going by ships, then toll revenue will fall even further.
That is something you shouldn’t look at from the point of view of tolls. You must look at it from the national perspective. The use of waterways is the most efficient. We have now farmed out traffic collection across the entire length of highways. Twice a year, every road stretch will get mapped through a scientific system by a third party. So over time you can see that…this is the kilometrage and this is the traffic in each segment of the road through a time series. Then you can use the data to do proper planning, see which corridor is becoming stressed, which we need to focus on. So this whole thing of traffic data going awry, that it didn’t meet predictions, will get sorted out.
