INFRA FALTERS

DESPITE AN AMBITIOUS TARGET, PUBLIC EXPENDITURE ON INFRASTRUCTURE - THE ONLY FUNCTIONAL ENGINE OF THE ECONOMY IS DWINDLING. THAT SPELLS BAD NEWS FOR ECONOMIC RECOVERY

- NIRBHAY KUMAR 

On July 10, Virendra D. Mhaiskar, Chairman and Managing Director of Mumbai-based IRB Infrastructure Developers, was enthused. IRB had emerged the preferred bidder for the ₹2,193-crore build, operate and transfer (BoT) project for six-laning the 63.83-km stretch of NH-19 from Dankuni to Palsit in West Bengal under the Bharatmala Pariyojana.

His joy was short-lived. On July 21, the National Highways Authority of India (NHAI) annulled the bids. Its rationale: it expected a premium or upfront payment from private developers while IRB asked for a grant. Bids for another BoT project were cancelled for similar reasons amid tepid market sentiment.

The development hurts NHAI equally badly as it prefers to award projects on BoT (toll) mode instead of Engineering, Procurement and Construction (EPC) or Hybrid Annuity Model (HAM) where it has to shell out funds upfront. This chicken-and-egg situation represents the dilemma — of government agencies as well as private companies, both starved for funds — in the roads sector amid demand destruction due to the Covid crisis.

Unruly combinations such as these brought down spending on road construction from ₹1,37,354 crore in FY19 to ₹85,275 in FY20 (till November 2019, as per latest data released), slowing road building from 10,855 kilometers a year in FY19 to 6,940 kilometers in FY20 (up to December 2019, as per latest data released). That’s a run rate of 84 per cent of target in road building and 93 per cent in spending.