For new Minister for Roads Nitin Gadkari, one of the foremost tasks will be to revive Foreign Direct Investment (FDI) flow to expand the road network in the country. Though 100 per cent FDI has been long permitted in the sector, yet so far the entry of foreign funds in infrastructure segment has been negligible.
Statistics with the Government show that FDI investment is less than five per cent in road projects that have been doled out by National Highways Authority of India (NHAI) under FDI.
“FDI in road sector is very cosmetic so far. The road sector has been opened to private sector participation, implementation of projects through Built-Operate-Transfer (BOT) concessions for over a decade now,” said an official in the Ministry of Roads.
“The earlier Governments had offered an enabling policy framework, including 100 per cent FDI in road construction, provision of capital grant, tax exemption and duty-free equipment to the prospective developers but it hasn’t translated into contracts,” said an official.
Officials are citing downturn in the world economy as an obvious reason which has kept investors away from putting money in infrastructure sector. “last two years have been very bad for not just India but for the entire world. Over two dozen projects doled out under PPP to Indian developers were stuck for paucity of funds, as investors failed to make their premium payments (one per cent of project cost to the Government within six months of being awarded),” said an official.
“In addition to that, slow and stringent rules for environmental clearances have been a major road block. land acquisition has always been a major challenge for the sector,” said an official. The officials in the Ministry are gearing up for back-to-back presentations to be made to Gadkari in the coming week.
“The Minister wants to enhance the FDI element in the sector and raise it to at least 20-30 per cent. We will first put forward the challenges ailing the sector and then brainstorming sessions are expected to follow to bring in funds into the sector,” said an official. The Indian Government estimates around $ 27 billion (over Rs 1.5 lakh crore) plus private investment is required over FY12-FY17 to improve the country’s road infrastructure.
“The National Highways Development Project (NHDP) was designed to upgrade, rehabilitate and widen major highways started in early 2000s. NHDP is planned to be implemented over seven phases. So far 33,500 kms are either built or under construction and over 21,000 kms needs to be awarded in the near future,” said an official.
“We have already started working on getting the existing awarded projects moving. Along with the NHAI, we will start the process of inviting more bids for new projects,” said an official.