Lower interest rates and cheaper raw materials are breathing fresh life into highway projects worth Rs 70,000 cr. The 60-odd projects come under the National Highways Development Programme (NHDP), and will add 6,500 km upon completion. The companies such as Reliance Infrastructure, GMR Infrastructure, Larsen & Toubro (L&T), Tata Realty, Soma Developers, Hindustan Construction and GVK have already submitted price bids and the projects are likely to be awarded by January.
The interest in road sector projects has also been facilitated by the recent government decision to increase the total project cost of all road stretches under Phase III and V by upto 20%. Most of the infrastructure companies were facing funding problems as there was substantial cost escalation which was not taken into note by the government. Higher project cost means higher borrowing limit and government grants (viability gap funding) for the developers. This (higher project cost) had also increased the sanction cost of the 60 projects to about Rs 80,000 cr.
The private sector has shown interest in these projects because interest rates are softening and prices of raw material like bitumen, oil, cement and others have also become relatively cheaper. NHAI last year could complete just 56% of the targeted road projects in 2007-08 down from 81% in 2004-05. After a series of setbacks, completion of road sector projects has now been identified as a priority by the government.
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