THE NHDP STORY
Deepak
Dasgupta*
India is a vast country
with a fairly extensive network of roads. With over 30 lakh kms
of roads, India has perhaps the second largest network in the
world after the USA. Out of this total road length, 58,112 kms
is the primary system consisting of the National Highways, 6,07,119
kms is the secondary system, namely, the State Highways and major
district roads and the balance 26,50,000 kms is the length of
rural roads. Despite the extensive network the various systems
are woefully inadequate and fail to provide the service required
of them. Although less than 2 per cent in length, the National
Highways carry 40 per cent of traffic but suffer severe capacity
constraints as most of these highways are 2-laned and, in fact,
around 15 per cent only is single-laned. The inadequate capacity
adversely affects mobility and adds very significantly to the
cost of goods being moved across the country. Even though fairly
extensive, the rural roads network does not provide an all-weather
communication to nearly 40 per cent of the habitations in the
country.
There are a number
of reasons for the inadequacies of our road network. Primarily
it has been the lack of resources provided to the sector which
was decreasing till the 9th and 10th Five-Year Plans been in real
terms. This, however, has been compounded by institutional deficiencies.
The Public Works Departments in the States were grossly overmanned
and had become a victim of the bureaucratic culture that constrained
their effective working. Thus even where funds were allotted the
projects languished and did not get completed for years together
and suffered high cost overruns. Poor maintenance systems compounded
the problem further.
In recent times
there has been a realization that infrastructural constraints,
particularly in the transport sector, came in the way of economic
growth. A high rate of growth is dependent on improved transport
services. The major impetus to the modernization of the roads
sector, however, came only after the announcement by the Prime
Minister in October 1998 for undertaking the building of a North-South
highway from Kashmir to Kanyakumari and an East-West highway from
Silchar in Assam to Saurashtra in Gujarat.
Initiative
Following Shri
Atal Bihari Vajpayee’s announcement a Task Force was set up under
the chairmanship of the Deputy Chairman, Planning Commission to
give a shape to the implementation of the announcement. It was
noted by the Task Force that while the North-South and East-West
highway corridors should be developed as announced by the Prime
Minister, priority be given to the corridors connecting the four
metro cities of Delhi-Mumbai-Chennai-Kolkata-Delhi, termed the
Golden Quadrilateral, where the intensity of traffic was the highest.
Accordingly, the Task Force decided on the National Highways Development
Project (NHDP) consisting of 5846 kms of the Golden Quadrilateral
and 7,300 kms of the North-South and East-West corridors. Besides
this another 1000 kms of roads, principal amongst them being the
connection of eight major ports, were also added. The task of
implementing the NHDP was assigned to the National Highways Authority
of India (NHAI), which was to complete the Golden Quadrilateral
by 2004 and the North-South and East-West corridors by 2009. Subseqently,
the date for the North-South and East-West corridors was brought
forward to end-2007. The Prime Minister flagged off the implementation
of the project by laying the foundation stone near Bangalore in
January 1999.
Profile
The project is
an ambitious one by any standard. Nowhere in the world has such
a huge project been attempted in such a short time. In India the
past achievements were very negligible. The last 50 years had
seen only 556 km being 4-laned which works out to an annual average
of 11.12 km per year. Under the NHDP and other projects, it was
proposed to do a length of around 14,800 kms for being 4-laned
in 9 years. This translates itself into around 1600 kms per year.
It undoubtedly represents a quantum jump in the programme of national
highways requiring an innovative approach.
The next aspect
that had to be considered was the funding of such a huge project.
The available budgetary resources were thoroughly inadequate for
the purpose and were essentially meant for the upkeep of the National
Highways system and carrying out some minor improvements. The
Task Force deliberated on this issue and felt that it was necessary
to create a dedicated source of revenue for the project. It therefore
recommended that a small cess be imposed on petrol and diesel
and accordingly the Government announced a cess of Re 1 per litre
on the consumption of petrol and diesel. The annual revenue from
this cess was expected to be Rs. 6000 crore, of which Rs. 2500
crore was earmarked for rural roads, Rs. 2000 crore for the NHDP,
Rs. 1000 crore for State Highways and Rs. 500 crore to the Railways
for improving level crossings. In order to ensure that the money
always remained available for roads, a non-lapsable dedicated
Central Road Fund was set up through a parliamentary legislation
and the proceeds of the cess were paid into the Fund. The proceeds
of the cess for NHDP received by the NHAI enabled the Authority
to leverage funds from the market, provide the counterpart funding
for borrowing from the World Bank and Asian Development Bank and
to leverage private investment into the project. This step for
project financing was so successful that the funds for the first
phase amounting to around Rs. 32,000 crore were tied up in no
time at all.
Capacity Building
While the implementation
of the project was entrusted to the NHAI, the Authority itself
was a new organization and required to be strengthened in terms
of its manpower and its capacity to take decisions. The practice
hitherto for road projects was that each individual project was
subject to the procedure for investment approval by the Government.
Clearly, such a procedure would have taken an enormous length
of time if 150 or so contracts to be awarded in the first phase
were subject to this procedure. The Government, therefore, agreed
to give its approval for investment on a programme basis. Thus
the investment for the first phase was approved in one single
decision of the Government and the Authority was authorized to
award individual contracts on approval by the Board of the Authority.
For this purpose the Board was appropriately strengthened with
the posts of Chairman and full-time Members being raised to that
of Secretary and Additional Secretaries respectively. In addition,
Secretary, Planning Commission, Secretary, Department of Expenditure
in the Finance Ministry, Secretary, Road Transport and Highways
and Director General Road Development were made part-time Members.
This strengthening of the Authority and the procedure adopted
enabled the NHAI to efficiently deal with the award of contracts.
It was possible to award more than 150 contracts in a very short
period of time apart from the contracts with the consulting firms
for project preparation and project supervision.
To enable the
Authority to build up its manpower, the Government allowed the
Authority to create posts upto the level of General Managers and
recruit people for the same. In order to quickly build up strength,
the only way was to get people on deputation from the Government,
State Public Works Departments and various PSUs. Nevertheless,
it was not possible to recruit enough number of people in the
short time available to manage such a huge task. Accordingly,
the Authority had little choice but to outsource activities such
as project preparation and construction supervision. Furthermore,
most decisions relating to contract administrations, which were
earlier taken departmentally, were allowed to be taken by the
supervision consultant or engineer concerned. This again has helped
NHAI to handle such a large programme and in fact has shown the
way for implementing large programmes or projects. While there
is some need to monitor the working of the consultants, it is
better that this be achieved through suitable strengthening of
contract provisions wherever considered necessary.
The next step
in this process is to outsource the procurement of construction
and supervision contracts. This is what is being attempted by
bringing private investment into the roads sector. Under these
private investment projects, the construction and operations and
maintenance responsibilities are taken over by the concessionaire
for the duration of the concession. He awards all the contracts
for the purpose. This leaves the NHAI free to handle other projects.
Indeed, the introduction of private investment into the roads
sector has been a major gain of the NHDP. Hitherto, the investment
in roads and their management was entirely in the public sector
but new opportunities for bringing in private investment and management
in this sector have now been created.
This has not
been easy since there had been no private investment in roads
earlier and unlike power and telecom, there was no system of charging
for the use of the road. Thus, even though the private investor
was being allowed to charge toll there was no idea about the risks
involved in realizing the toll or how the toll would affect the
traffic on the particular road. The sharing of risks, therefore,
had to be very clearly defined and this was done with the help
of model concession documents that were prepared after long discussions
with various stakeholders including the financial institutions.
In order to mitigate the risk of the private investor to some
extent, the Government offered to pay through the NHAI a capital
grant upto 40 per cent of the cost of the project. To encourage
greater flow of private investment into roads the Government took
away the traffic risk on some projects by agreeing to pay an annual
sum (annuity) over the period of the concession while retaining
the right to toll with the NHAI. In all, the NHAI has so far awarded
911 kms of roads on Build Operate and Transfer (BOT) basis (both
toll-based and annuity) with an estimated project cost of Rs.
5,668 crore. Another variant for getting market-related funds
into roads was the mechanism of Special Purpose Vehicle for projects
that could be viable but not entirely free from risk in the eyes
of the private investor and where the NHAI would set up a company
in which it would contribute equity and the company would borrow
the remaining amount in the market.
Achievements
The first phase
of the NHDP is well on its way with work going on in all the contracts.
Many of these contracts would get completed by the middle of 2004
if not earlier. Some delay has been caused in handing over the
land, removal of structures, the shifting of utilities and the
cutting of trees. Despite the fact that a fast track mechanism
has been put in place for land acquisition for national highways,
yet the detailing of land from the revenue record and other procedures
have taken time in some cases. In others the shifting of utilities
and tree cutting have taken time. Nevertheless, because of the
push being given from the top by the Minister for Road Transport
and Highways and the co-operation of the State Governments, the
progress has been quite remarkable when compared to the time taken
in the past for such activities.
The NHDP has
been a big success not only in building four-laned highways with
high specifications but also in technologically upgrading and
capacity building of the entire road construction industry. The
industry can now undertake big projects with relative ease and
to high quality. While there would be very significant economic
benefits on the completion of the project, considerable impact
has been felt even during the construction. Large-scale employment
has been provided both in the skilled and unskilled categories
and a tremendous fillip has been given to the construction machinery
and commercial vehicles industries. The demand for items like
cement and steel has grown very rapidly as a result of the implementation
of the project.
The stage is
now set for construction work to begin on phase two of the project.
So far the NHDP has been a major success. It has been a unique
example of the public sector facilitating the work and enterprise
of the private sector. This can be taken further in the management
of roads by devising suitable formats for long-term operation
and maintenance contracts being done by the private sector. Above
all, the road construction industry is being fully modernized
and this perhaps will give the requisite impetus to the modernization
of the entire transport sector and help remove a major infrastructural
bottleneck in the Indian economy. (PIB Features)
*Former
Chairman, NHAI
