Segregation of Civil Construction cost from capital cost of National Highways projects for appraisal and approval

By | November 18, 2015
press release by Cabinet Committee on Economic Affairs (CCEA) of Govt of India 18-November, 2015
Segregation of Civil Construction cost from capital cost of National Highways projects for appraisal and approval

The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has given its approval to segregate construction cost from cost for land acquisition, centages and pre-construction activities for the purpose of appraisal and approval of National Highways (NH) projects for the following dispensation:

(i) All NH projects with a civil construction cost of up to Rs.1000 crore shall be appraised by SFC/EFC/PIB headed by secretary, Road Transport and Highways and approved by Minister, Road Transport and Highways.

(ii) All NH projects with a civil construction cost above Rs.1000 crore shall be appraised by PPPAC/EFC/PIB headed by Secretary, Department of Economic Affairs/Expenditure and approved by CCEA.

By adopting the policy, the avoidable delays in the process of appraisal and approval of NH projects will be suitably addressed. Speedy appraisal and approval will help in meeting the award target of 10,000 km set for this year.

Background:

Currently, as per standard practice before getting an investment approval from the Cabinet/Cabinet Committee, all NH projects are first appraised by SFC/EFC/PIB/PPPAC. In addition to the above, many rounds of appraisal are also carried out by various Committees like the Standing Cost Committee, etc. under the Ministry of Finance, MoRTH and/or NHAI to examine its viability and cost effectiveness.

PPPAC is an appraisal body for Infrastructure Projects to be implemented on Build-Operate-Transfer (BOT) (Toll, Annuity and now Hybrid Anniity) under the Ministry of Finance, Department of Economic Affairs having representation of Ministry of Finance as well as NITI Aayog, Ministry of Road Transport and Highways, Department of Legal Affairs, and NHAI. As per OM no 1/22/2012-PPP dated 18.02.15, PPPAC appraises and approves the Total Project Cost (civil cost + centages) of BOT projects, where the financing is expected to be raised by the concessionaire. This cost excludes the cost of pre-construction activity which is already undertaken and paid for by the Authority.

However, in case of EPC projects, the EFC/PIB appraises and approves Capital Cost that includes construction cost, centages, cost of pre-construction activities and the cost of Land Acquisition cost ;

Above said multiple stages of examination and appraisal of the same project by different Ministry/Department/Committees cause avoidable delays in award of NH projects. Taking note of such difficulties and with a view to minimize levels of decision making, the CCEA has empowered the Ministry of Road Transport and Highways to decide on the change in the mode of delivery of individual NH projects.

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