Over 100 highway projects are yet to take off in the country

The economic reforms of the early 1990s and brisk pace of change in the Indian economy led to focused attention on the inadequacy of basic infrastructure in the country. 

The lack of resources to upgrade and create new infrastructure provided increasing space for the public private partnership (PPP) model of growth, attracting both domestic and foreign investors. 

Better road connectivity was rightly identified as an essential pre-requisite for bringing about transformative changes in the Indian economy. Highway construction has more than doubled with a rise in award of highway projects in the past four years. While construction has reached 27 km a day, the daily award of works was 47 km during 2017-18. 

The total expenditure in highway construction has increased more than three times since the NDA government came into power. Among the infrastructure projects, road construction remains the most tangible sign of development, apart from being a job creator.   

Road transport minister Nitin Gadkari had set an all-time high target of building 15,000 km of roads in 2016-17, but only managed 8,200 km of roads. In other words, construction has gone up from 4,410 km in 2014-15 to 9,828 km in 2017-18 during this financial year. 

This construction figure, however, is the highest that the ministry has achieved till date and is more than double of what the previous UPA government had managed. Between 2009 and 2014, on an average 6 km to 9 km of roads were built per day.

For this improved performance, dispute resolution has had a big role to play. The National Highways Authority of India (NHAI) under the Ministry of Road Transport & Highways (MoRTH) is amongst the largest organisations in the country farming out contracts to contractors/concessionaires/consultants in various modes (item rate, BOT - toll and annuity, hybrid annuity, EPC, OMT, among others).

By early 2012, the extent of claims against NHAI had assumed serious proportions along with associated legal costs and diversion of manpower to handle them. 

The first attempt at addressing this was made in December 2012 by drawing up an alternate dispute resolution mechanism aimed at one-time settlement of pending claims in the item rate contracts. This mechanism was further extended to cover all other forms of contract in 2016. 

This initiative proved to be useful and by 2017, over 111 cases had been settled by NHAI for Rs 1,713 crores against claims in excess of Rs 18,743 crores. 

The efficacy of this mechanism was duly acknowledged by the Cabinet Committee of Economic Affairs (CCEA) in September 2016, when it approved the establishment of such conciliation committees by all ministries/departments and PSU’s under the Government of India to ensure speedy disposal of pending or new cases. Recourse to such conciliation is open before, during and after the arbitration proceedings.

Notwithstanding the above, several aggrieved contractors/concessionaries with deeper pockets and capacity to sustain the time consuming legal process continued to opt for the arbitration route. 

This was also based on their assessment that the probability of success in any arbitration against a government organisation was very high. For NHAI, the arbitration route was a cause of great concern on account of the high cost of arbitration as well as the delays in the completion of the proceedings. It was with this backdrop that the Society for Affordable Redressal of Disputes (SAROD) was established in August 2013. 

SAROD has been a game-changer for the National Highways sector by ensuring both timely and cost effective outcomes for all arbitration cases between the authority and its aggrieved contractors.  However, it is important to remember that about 15 projects continue to be stuck involving at least Rs 16,000 crore. A sizeable number of projects, well over 100, are yet to take off more than seven months after these were awarded for different reasons, including land availability and financial issues. 

In addition, hardly any project has been bid out on BOT in the past three or four years.   

The reconciliation process, has however, resulted in reducing the pendency of disputes and ensured judicious awards by associating subject matter technical experts in the arbitration process. The only way to ensure timely and affordable dispute resolution is by binding the arbitrators to a prescribed “Code of Conduct” as laid out under its “Rules for Conduct and Discipline of Arbitrators and the Conduct of the Arbitral Proceedings”. 

Any individual offering himself for appointment/empanelment as arbitrator in the Panel of Arbitrator maintained by the Society is required to give a written undertaking to abide by the above.

The writer is former Union secretary, MoRTH