CCEA approves revised project cost for 7 highway projects

New Delhi: Continuing its efforts to make the ongoing national highways projects attractive to the bidders, the Cabinet Committee of Economic Affairs (CCEA) approved the new, upward revised project costs for seven more projects.

Last week, the CCEA had approved similar moves for six key projects and their sub-projects.

The move indirectly allows highways developers to seek higher viability gap funding (VGF) from the Government. The developers are allowed to claim up to 40 per cent of total project cost as VGF while bidding for the projects. While the maximum limit of VGF in percentage terms has not been changed, higher project costs have been allowed.

VGF is basically a Government grant that highway developers can claim to build and operate a highway for a certain period, in case the expected toll revenues during the concession period are not enough to make the project financially attractive.

The Highways Ministry and the National Highways Authority of India (NHAI) had recently decided to allow an upward revision of National Highways projects to make them attractive for highways developers.

As per the decision, for projects that had taken into account input costs obtaining in 2007, the total cost will be revised upwards by 10 per cent. And projects that had input costs obtaining in 2006, the total costs will be revised up by 20 per cent. The CCEA approved the proposal for selective projects.

The CCEA has also approved a move to increase the concession period for some projects to allow for toll collection for longer durations. “We have studied the traffic projections, project costs and expected toll revenues while deciding to increase the concession period of project,” said a top NHAI official.

The highways widening projects for which there has been an upward cost revision are Armur-Adloor Yellareddy section of NH-7 in Andhra Pradesh; Karaikudi-Ramanathapuram section of NH-210 in Tamil Nadu; MP/Maharashtra border-Dhule section and six laning of Pimpalgaon-Nasik-Gonde section of NH-3 in Maharashtra; Panikoili-Keonjhar-Rimouli, Rimouli-Roxy-Rajmundra sections of NH-215 and Chandikhole-Duburi-Talcher section of NH-200 in Orissa.

The highways development programme has suffered in 2008 due to multiple reasons, with NHAI unable to bid out any project. In Novemebr-December 2008, the Government started considering measures such as bringing in a new toll policy, allowing developers to seek higher VGF and increasing the concession period to make the projects attractive for the bidders. During the last few days, NHAI has been able to attract bids for eight highway projects.