Delay in highway projects could disqualify companies from future contracts

Published On: 06, Dec 2017 | Source: business-standard.com

Companies delaying execution of projects may be disqualified from bidding in the next round of contracts as the government is mulling over a policy that would debar concessionaires from tenders of fresh road projects if the previous contracts of the same company have missed completion timelines.

According to a proposal, the government is not in favour of completely blacklisting companies that have missed completion timelines of their projects despite receiving the necessary regulatory clearances. “If there is no delay in land acquisition or receiving other regulatory clearances, but the progress on the project is sluggish due to delays on the part of the concessionaire then the government can debar that company from submitting bids for other projects,” a road ministry official told Business Standard.

The debarment would be temporary and subject to certain conditions. For instance, if one construction company is executing 10 projects of which, seven are delayed then it can only be allowed to bid for a new project if work gets completed on at least four of the seven delayed contracts.

Though there is a provision for blacklisting companies, such a step is not taken frequently. Last month, the NHAI issued a list of 20 contracts, including those with L&T Infrastructure, HCC, Essel Infra, MBL Infra, and Soma Enterprises that could be terminated over delays in implementation. The termination of these contracts has not happened after the initial show-cause notice.

The NHAI had terminated a contract with Transstroy Ltd, which was signed in April 2012, for four-laning of the Obedullaganj-Betul section on NH-69 in Madhya Pradesh, due to the extremely slow work pace on the project.

Some experts feel that complete blacklisting of a company would hamper the growth in the infrastructure sector, which was better off than most in terms of non-performing assets (NPAs).

They said the government should ensure that the companies are not highly leveraged at the time of the tender and but are also fit to bid for the projects. “The bid capacity of the concessionaire should be established beforehand. If the total worth of the company is Rs 200 crore, it cannot execute projects worth Rs 10,000 crore,” Adil Zaidi, partner, economic development, and infrastructure advisory, EY, said.

Besides, there are very few big companies that are in the business. Debarment of even few of them would limit competition in the sector.

The comprehensive proposal would be applicable for the projects executed by the Ministry of Road Transport and Highways, the National Highways Authority of India (NHAI) and the National Highways and Infrastructure Development Corporation (NHIDCL).

However, analysts believe that the move would not help as the government needs to first establish the reasons that are causing a delay in the implementation of the projects.