Due caution needed before changing road MCA
Given the stress level in the highways sector which have resulted in a large number of projects not taking off—the reasons range from environment delays to the projects becoming unviable—the government has done well to give the roads and highways ministry the powers to restructure contracts. This was a necessity considering National Highways Authority of India (NHAI) could award just 1,116 km of roads against the target of 9,500 km in FY13, and only 1,436 km of the targeted 4,030 km in FY14. The CCEA last week empowered the ministry of road transport and highways to amend the Model Concession Agreement (MCA) and decide on the mode of delivery of projects. As the government press release put it, this “unnecessarily burdens the CCEA with issues that are not commensurate with its stature and competence, apart from adding to avoidable delays in the implementation of the National Highways Development Project (NHDP)”. In other words, the decision will help restructure the troubled projects expeditiously and will also infuse confidence in the project developers and also the lenders wary of taking up road projects.
It is important that the roads ministry be cautious while exercising this power. Many road projects have different circumstances, and it is important that there be some flexibility for the line ministry. But for larger decisions, such as renegotiating a contract, there have to be some overarching principles that need to be laid down, and inter-ministerial consultation for this is a good idea—given that the NDA takes pride in the good coordination between its ministers, this is unlikely to be as time-consuming as it was in the past. Given the current slowdown, most road developers would like their payments schedule to NHAI to be rescheduled—the question is whether this is a good idea and whether the current MCA has a provision to deal with such problems. While the Rangarajan committee on roads eventually used a provision in the MCA for its proposed rejig of road projects, it is not necessary the government accept the same findings. The point, however, is that there needs to be a uniform principle that applies across the sector, and this is something that is best dealt with by inter-ministerial groups. More important, any change proposed in the MCA has to be the subject of an open consultative process to avoid problems going ahead. The roads ministry had come up with the idea of an asset reconstruction company with NHAI and banks as sponsors but, it now appears, the banks are not too keen on the proposal. All such matters will get ironed out during a larger consultation process.