Source: Business Standard, June 28, 2017
New Delhi: The share of big companies like Punj Lloyd and Larsen & Toubro in national highway contracts has shrunk while that of medium-sized firms like Gawar Construction and Dilip Buildcon has increased in the past couple of years, with the government focusing more on awarding projects under fully funded EPC and partially funded HAM models.
Experts say large firms have shown less interest in the engineering, procurement and construction (EPC) and hybrid annuity model (HAM) contracts as their core principal is ‘high risk-high reward’, which the two models do not offer. This, they add, has worked to the advantage of small- and medium-sized companies, which have a low risk appetite.
Large companies mainly execute build-operate-transfer (BOT) projects, which have high risks but also offer better rewards. Under this mode, a developer constructs a highway, operates it for a specified duration and transfers it back to the government, which then pays the developer annuity over the period of concession.
According to the National Highways Authority of India (NHAI), in 2015-16, 79 highway projects worth Rs 68,395.76 crore were awarded. In 2016-17, the number went down to 77 contracts, which were worth Rs 60,915.36 crore.
An analyst said large companies had enough exposure in the highway sector and were now keen on executing strategically important projects only.
The number of EPC contracts with Hisar-based Gawar Construction, which had a single project — Kullu-Manali double-laning project worth Rs 273.2 crore — in its kitty in 2015-16, rose to five (worth Rs 1465.38 crore) in 2016-17.
Bhopal-based Dilip Buildcon bagged seven contracts worth about Rs 7,100 crore in the last financial year (2016-17), while the number of contracts bagged by Punj Lloyd was down to zero in 2016-17, from four in 2015-16, according to the official NHAI data.
Experts feel that in 2017-18, the likely trend will be private equity funds taking a bigger share of the pie with the government offering projects on TOT (toll-operate-transfer) basis. Big companies are again likely to skip the EPC and HAM projects this financial year, another expert adds.
The ministry of road transport and highways has shortlisted 111 road projects for monetisation, of which four-to-five projects of about Rs 2,000-3,000 crore would be bundled together in the first tranche.
Private equity investors and pension funds, including Abu Dhabi pension fund, have shown interest in buying lease for the projects. The highway contract for the Kolkata-Chennai corridor (mainly in the state of Andhra Pradesh) would be in the first tranche. The projects have been chosen keeping in mind the expected traffic augmentation on these routes in the next 25-30 years.
The central government would utilise the funds raised from monetisation of these projects for financing EPC and HAM projects.