Economic Survey 2018: Road sector NPAs jump to Rs 36,596 crore

In the last five years, the non-performing assets (NPAs) in the road sector have increased from Rs 2,424.17 crore to Rs 36,596.23 crore.

"During 2012-13, total credit advances to road sector were Rs 127,430 crore, which increased to Rs 180,277 crore as of September 2017-18. The share of NPAs out of total advances in road sector increased from 1.9% in 2012-13 to 20.3% in September 2017-18," read Economic Survey tabled in the Parliament on Monday.

Sudden spike in NPAs were reported during 2014-15 and 2015-16.

As of September 2017, 1,263 highway projects were underway across the country. Of these, there are 482 stalled projects in the road transport and highways having an original cost of Rs 317,373.9 crore.

Among the 482 stalled projects of Ministry of Road Transport & Highways and National Highway Authority of India (NHAI), 43 face cost overruns and 74 projects time overruns.

"Some of the projects under different phases of National Highway Development Program are delayed mainly due to problems in land acquisition, utility shifting, poor performance of contractors, environment/ forest/wildlife clearances, road over bridge & road under bridge issue with Railways, public agitations for additional facilities, and arbitration/contractual disputes with contractors, etc," mentioned the survey.

"Earlier, road projects were largely awarded on public-private partnership (PPP) model. Gradually, the sector and projects came under stress due to a variety of reasons right from lending issues to lack of land acquisition to clearances not in place, etc. All these factors affected highway construction rate and eventually resulted in NPAs," said a road developer.

Most of the road projects, which are now under NPAs, were awarded between 2010-11 to 2013-14 and there was implementation period of around three years. After the developers were unable to complete the project, the NPAs started mushrooming.

Consequently, the private investment started to decline and the government had to step up spending on the infrastructure projects.

"Going forward, in the next couple of years, the NPAs should come down to around 12% because the government has been awarding projects largely on engineering, procurement & construction and hybrid annuity model," said Sandeep Upadhyay, managing director and chief executive officer of Centrum Infrastructure Advisory.

"In order to facilitate implementation of the projects, hybrid annuity model instead of engineering, procurement & construction has been adopted. Capital expenditure is deferred under hybrid annuity model and requires lesser amount of funds during construction years in comparison to projects on engineering, procurement and construction mode."

Further, initiatives such as monetisation of projects through the toll-operate in transfer model, securitisation of toll revenue, adopting the infrastructure investment trusts route, other innovative financing options including LIC, long-term pension funds, etc, have been taken to attract fresh capital from the market on the strength of already operational projects. With proactive policy interventions, around 88% of these projects have now been put back on track, or appropriately re-engineered and restructured and the total number of stalled projects have been reduced to three," read government's report.

Simultaneously, it also revived many of the stalled road projects by way of one-time fund infusion by NHAI, streamlining land acquisition and environment clearances, exit for equity investors, revamping of dispute resolution mechanism, etc.

BIG BURDEN

• Share of NPAs out of total advances rose from 1.9% in 2012-13 to 20.3% in Sept 2017-18
   
• Sudden spike in NPAs reported during 2014-15 and 2015-16
   
• As of Sept 2017, 1,263 projects were underway; 482 stalled