India to Award $16.5 Billion in January for 60 Highway Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--National Highways Authority of India (NHAI) (New Delhi), the central authority that develops and manages nearly 66,500 kilometers of road network in India, will award contracts worth $16.5 billion for more than 60 projects in January 2009. Most of these projects are part of the National Highways Development Project (NHDP) initiative to convert existing highways to four and six lanes, adding 6,500 kilometers to the present network upon completion.

The recent drop in interest rates, availability of cheaper raw materials, increase in total project cost and relaxation of bidding norms has suddenly drawn private players to highway projects that promise good returns in the long term. Because of the higher cost of financing, elaborate procedures and litigation, most NHDP projects had failed to attract favorable response from bidders in the recent past. Certain projects, such as the $550 million expressway project connecting Faridabad, Noida, Ghaziabad and Sonepat, did not meet the mandated five bids required at the price-bid stage of the bidding process. This 135-kilometer, six-lane expressway was eventually awarded to Reliance Industrial Infrastructure Limited (BSE:523445) (Mumbai), as the company was the only bidder in two rounds of bidding conducted by NHAI.

NHAI has completed the request-for-qualification process and identified qualified bidders for more than 45 projects in Phase III and Phase V of the NHDP initiative. Evaluating eligible developers on technical and financial grounds for the other projects is under way. Phase III involves improving and creating four lanes for over 10,000 kilometers of national highways on a build, operate and transfer basis. Phase V, consisting of 42 projects, includes creating six lanes for 6,500 kilometers of existing four-lane highways, about 5,700 kilometers of which covers the Golden Quadrilateral. Phase V projects will be executed on a design, build, finance and operate basis.

Some major private infrastructure developers such as GMR Infrastructure Limited (BSE:532754) (Bangalore, Karnataka), Larsen & Toubro Limited (BSE:500510) (Mumbai), Tata Realty and Infrastructure Limited (Mumbai), Soma Enterprise Limited (Hyderabad, Andhra Pradesh), Hindustan Construction Company Limited (BSE:500185) (Mumbai), Reliance Industrial Infrastructure Limited (Mumbai) and GVK Power and Infrastructure Limited (BSE:532708) (Secundrabad, Andhra Pradesh) have already submitted their financial bids to NHAI for various projects under Phase III and Phase V. The projects are likely to be awarded next month. While Phase III-A projects are scheduled to be completed by the end of 2009, Phase III-B and Phase V projects are slated for completion in 2012.

NHAI projects are running behind schedule, as only 56% of the total targeted projects in 2007-08 were completed. However, this is set to change, and road projects are likely to get an impetus with the government asking banks to lend funds to private developers. Road projects by Mumbai Metropolitan Region Development Authority, the regional body responsible for planning and development of various urban projects in Mumbai, have also faced a setback. MMRDA is in the process of executing major flyover projects worth $50 million along the eastern and western expressways. Of these projects, 11 are running behind schedule from various reasons such as cost escalation, delays in obtaining clearances from traffic police and relocating utility services. The projects were initially planned to be operational by June 2009, which might now be delayed to January 2010.

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