Govt creates panel to examine NHAI note

New Delhi: The ministry of road transport and highways has decided to constitute an inter-ministerial committee to review the note prepared by the National Highways Authority of India (NHAI) seeking an overhaul of the existing model concession agreement to revive private sector interest in the road sector, said two government officials who did not want to be named.

The model concession agreement is the contract that sets the terms of execution of a project and is signed between the concessionaire and the government, in this case the NHAI.

The ministry has decided to constitute a committee with secretary-level officials from the road ministry, NHAI, the Planning Commission, department of economic affairs and representatives from a builders’ lobby, said a road ministry official who did not want to be named. Vijay Chhibber, secretary in the road ministry, will head this panel.

NHAI, which has been working on the draft for a new model concession agreement, made a presentation at the road ministry this week, the officials said.

“The road ministry has certain reservations about some aspects of this draft. PPP (public-private partnership) hasn’t worked, doesn’t mean that the government assumes a bigger role to address most issues. So we have decided to form a committee that will look into what modifications need to be made,” said one of the two officials.

“In fact, we could even look at making this committee into a permanent body to look into MCA-related issues that could come up from time to time,” the official added.

The note prepared by NHAI has proposed 50-60 changes in the existing model concession agreement, the second official said. “Provision for revising total project cost jointly with the lenders at the time of financial closure from what was estimated at the time of bidding, withdrawing any waiver of pre-conditions for bidding like getting clearances and providing for specific evaluation of the compensation for developer in case of any change in law affecting income from project are some of the changes that have been proposed,” the official said.

NHAI resumed work on preparing the draft after the change of government at the Centre. The work on this draft was first started under the previous United Progressive Alliance government, but it was reluctant to push it.

The industry has been demanding a relook at the model concession agreement for over a year to address the issue of resolving disputes and cost escalation, among others, to revive private sector interest in the road sector.

As many as 21 highway projects worth more than Rs.26,000 crore failed to attract bids over the last two fiscal years.

The model concession agreement for highways was last revised in 2009 in line with recommendations of the B.K. Chaturvedi committee.

“Three fundamental points must be woven into the revised MCA that address the issues that caused problems in the sector. First, inappropriate allocation of risk. Second, over eagerness of the entire system to financially close projects at any cost for privatization, even those which were not viable. Third, no provision in the MCA to address issues beyond the control of all stakeholders, “said Parvesh Minocha, managing director of transportation business at infrastructure consultancy Feedback Infrastructure Services Pvt. Ltd.