After bagging the Rs 1,725 crore Pune-Satara highway project last week from the National Highways Authority of India (NHAI), Reliance Infrastructure is inching closer to the Rs 1,000 crore Kandla-Mundra road project, spanning 71 km, in Gujarat.
The company has quoted the maximum premium amount (negative viability gap funding) worth Rs 42 crore, among five other contestants. The GVK-led consortium, coming second, had quoted a premium of Rs 30.6 crore.
While awarding highway development projects, the government pays up to 40% of the total cost of the project in the form of viability gap funding. This is to make the projects viable for the developer. But in some cases, developers post their assessment of the project and commit either a premium or a revenue share to the government, to incentivise the government for preferring them over other bidders.
Confirming Reliance Infrastructure’s premium offer for the project, a top NHAI official said, “These are the cases where companies feel that the toll revenues will be sizeable enough to meet such commitment.”
The project, scheduled to be completed by December 2012, entails the upgrade and maintenance of Gandhidham (Kandla)-Mundra Port stretch, which links the Kandla and Mundra ports in Gujarat. The project is also very significant for inland connectivity between the ports.
The bidding process for the project was initiated during February this year. Of the 20 bidders qualified for the financial bidding stage, six participated in the bidding. Of this, four companies offered a premium to the NHAI, while the rest demanded grants from the authority.
Meanwhile, the Pune-Satara highway that Reliance Infrastructure bagged on December 4 was based on a premium offer worth Rs 90.90 crore. The company intends to increase its exposure to highway projects at Rs 20,000 crore by 2012, compared with Rs 7,500 crore.
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