Govt to Promote EPC Model of Road Construction

Published: 15th July 2014 04:25 PM  |   Last Updated: 15th July 2014 04:25 PM   |  A+A-


NEW DELHI: The government will develop highways under the EPC (engineering, procurement and construction) mode and will try to resolve the issues surrounding earlier projects soon.

"The department will focus on developing upcoming road project on EPC mode for the coming two years rather then PPP (public private partnership) mode. The shift to EPC mode is due to the fact that PPP modes are economically not viable at this moment," Gadkari spoke at the inauguration of a seminar here.

The shift in policy is significant given the new government's focus on developing infrastructure.

The EPC entails the contractor build the project by designing, installing and procuring necessary labour and land to construct the infrastructure, either directly or by subcontracting.

However unlike PPP, the financing is done by the government and not by banks or private equity funds through issuing of sovereign bonds or taking financial guarantees for the project.

“Delays have caused huge number of stuck projects. The private contractors now want to exit these projects as there has been no progress for a long time this has caused the build up of non-performing assets (NPAs) of banks which are now under stress,” Gadkari stressed, elaborating the reason for shift to EPC model of road development.

The highway sector currently contributes around 4.5 percent to the GDP and is responsible for job creation and has a multiplier effect on the economy. However, delays due to land acquisition, forest clearance, defence land handovers have stalled progress in the sector.

This has caused build up of project NPAs worth crores of rupees where banks have participated or helped in financial closure.

Industry estimates show that under the current dispensation of road development only three km of highways are added everyday from a target of 20 km.

The minister expects to add 30 km a day after resolving all the delays in two years.

Finance Minister Arun Jaitley in his budget speech has proposed to provide Rs.37,881 crore to highway development. The government is targetting to develop 8,500 km of highways in 2014-15.

According to Gadkari, who was speaking at the National Roads and Highways Summit being organised here by industry lobby PHD house, around 189 projects are stuck in his ministry due to delays.

Industry estimates the cost of these projects which are worth Rs.60,000 crore to have escalated further.

"Delays range from land acquisition, forest clearance and dispute between state governments. We are trying to get together all the stake holders to resolve these disputes at the earliest and finish the work," Gadkari said.

He said the ministry has been working to find solutions to problems faced by projects worth Rs.40,000 crore.

The minister expects to meet all the stakeholders including bankers, developers, state government's representatives and department officials to find ways to resolve the delays in projects by Aug 25, 2014.

"There will be a monthly meeting with representatives of various ministries and departments including those of railways, defence, and environment and forests to resolves issues concerning road developments," Gadkari said.

The minister further pointed out that his ministry was in touch with a foreign government for gaining long-term fiance at attractively low interest rates by giving 26 equity stake.

The financing is expected to be worth Rs.100,000 lakh crore for upcoming projects. Under the patient fund scheme whereby long gestation infrastructure projects are financed.

The minister added tat there were also plans to transport gas, power and information (IT) side-by-side highways.

He further added that the government is keen on developing cement-based roads as they are four percent cheaper and maintenance-free for around 200 years.

In terms of pertaining laws covering road safety, the minister said that his ministry was studying international laid down laws and norms and will adopt the best practices in amending Indian laws.

The department is currently studying automobile laws of countries like US, Canada, Brazil and Germany.

Gadkari said that safety aspects and other issues relating to Indian law will be brought in for amendment in the next session of parliament.

The amendments are expected to include new policy for use of ethanol in cars, public transport and to promote safety on roads.


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