Growth prospects in the current fiscal, 2013-1314, were expected to be sluggish, with no clear indicators towards a surge in demand for construction equipment. However, the recent developments in otherwise depressed business sentiments are something to cheer about. Hoping against hope, the CE industry was eagerly waiting for the Cabinet Committee on Investment (CCI) to come out with clear-cut strategies in removing the hurdles to implementing National Highway projects; that is now finally back on track. In a major step towards removing the bottlenecks in road projects, the CCI has recently relaxed forest clearance norms for these projects and has also decided to give special exemptions on forestry clearances. For linear projects, CCI will de-link the grant of environment clearances from forest clearances, as per reports. Hopefully, the move will perk up the sagging industry.
If we look at the 2012-2013 period, the NHAI project award faced significant challenges, mainly due to policy-related hurdles such as environment and forest clearances, besides delayed financial closures. The new project award touched a low of around 800 km in FY2012-13.The actual completed road projects during the same period was 2,800 km against an annual target of 7,300 km. The response from bidders dropped due to the slowdown in economy, lack of viability of some projects, lack of clarity on regulatory and clearance issues. This resulted in a steep drop in the requirement of construction equipment, and given the scenario, the CCI's move to provide special exemptions is viewed as a step in the right direction.
CCI has also raised the ceiling of 4,000 km of four-laning under the National Highways Development Project phase-IV to 8,000 km on a build-operate- transfer (BOT-toll) mode. It has allowed the upgrade of 4,000 km of roads on an engineering, procurement and construction (EPC) basis. This will see a host of projects finding takers, as the market does not have the appetite for taking construction risks. CCI also decided to treat the strengthening and widening of existing national highway infrastructure projects differently from new projects and, in the case of widening projects, will allow the construction of national highways in non-forest areas. According to the Finance Minister, the government is also taking steps to attract investments from overseas. Further, he has had parleys with banks in Mumbai, Bangalore and Delhi on how the logjam in projects can be eased.
Regular monitoring by the CCI and the acceleration of the EPC mode will bring life back to these projects.