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| NHAI may have to change norms to get World Bank loan |
| Mihir Mishra / New Delhi Aug 20, 2010, 17:29 IST |
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The National Highways Authority of India (NHAI) will have to tweak its norms and allow developers from all the countries to bid for projects even in the sensitive areas, if it avails of a World Bank loan.
NHAI does not allow road developers from countries like China to bid for projects in regions where India shares its border with China. “The Bank norms require that construction companies from all countries should be allowed to bid for projects, which we do not always allow,” said an NHAI official.
The highways authority is looking at borrowing $2 billion in loans from the World Bank to fund annuity projects and for viability gap funding (VGF). Discussions on this have been on within the government. Projects in far-flung areas, like Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Uttar Pradesh and the northeastern states, some of which also border China, are not financially viable for the private sector and are, therefore, with them in Build, Operate and Transfer (annuity) mode. “There is no point taking loan for annuity projects if these states are not included in the loan portfolio,” said another official.
In annuity projects, a road contractor builds a road and the government pays it at intervals, depending on the amount of the work completed, unlike other BOT projects where private operators are dependent on income from toll for return on investment.
The World Bank, in a reply to an email query, confirmed discussions were on within the government. “The Bank, as requested by the government, has done some preliminary work on the possible financial impact of financing through World Bank-supported BOT annuity projects. The government is now considering following up on this and exploring the possibility of World Bank support for annuity projects, taking these findings into account,” said the email reply.
On a specific query on the Bank relaxing norms, the Bank replied that there had been no discussions on relaxing norms. The Bank was yet to put up the loan proposal before its board.
The Bank norms also require NHAI to follow more stringent land acquisition and relief and rehabilitation norms. A suggestion on giving 40 per cent of the annuity payment to contractors upfront and the remaining in instalments will be discussed by the NHAI board in its meeting later this month.
Road Transport and Highways Minister Kamal Nath had earlier sought views of Planning Commission Deputy Chairman Montek Singh Ahluwalia on the possibilities of seeking loans from the World Bank. This followed an observation from the finance ministry that the loan from the multilateral agency came with riders, seeking changes in the bidding procedure of the highways authority.
The letter, however, says the road transport and highways ministry will not compromise with the national policies and the negotiations will be within the existing policy parameters. This is the first time the Bank will finance annuity projects and do viability gap funding. Till now, funding from the World Bank for the National Highway Development Project have been confined to engineering, procurement and construction (EPC) projects, costing over Rs 4,000 crore. In an EPC project, the government builds the road through a contractor.
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