O/o Principal Director Commercial Audit & MAB-I New Delhi Indian Audit & Accounts Department1

Performance Audit of PPP Projects of NHAI

O/o Principal Director Commercial Audit & MAB-INew Delhi

Indian Audit & Accounts Department 1

• India has a National Highways network of 65569 km which is 1.7 per cent of the total road network of the country and it carried over 40 per cent of total traffic.

• The role of developing, maintaining and managing National Highways has been entrusted to NHAI which was established in 1988 by an Act of Parliament as a body corporate to discharge its functions on business principles.

• Performance Audit on “ Implementation of Public Private Partnership in NHAI” was taken up in August/September 2012 by this office along with 5 other MABs (Mumbai, Kolkata, Hyderabad, Chennai & Ranchi)

A PA was earlier conducted during 2006-07 and the findings reported in C&AG’s Report No.16 of 2008.

• A sample size of 94 projects/stretches of NHDP Phase II,III,IV,& V was selected for the PA

• The committee on infrastructure in 2005 approved the broad contours of NHDP which included 7 phases.

• Phase I & II were taken up under the EPC mode.• From phase III onwards GoI started awarding NHDP projects under the PPP mode.• Two main modes of execution under PPP were BOT – Toll basis & BOT –

Annuity.2

Introduction

BOT Toll : The concessionaire is responsible to finance, construct, operate and maintain the road stretch. He is entitled to collect and retain the toll collected during the concession period. In case the estimated toll collection , falls short of the project cost including return on investment, NHAI provides finance to meet the gap in the form of viability gap funding. In certain cases, the concessioner may offer premium.

BOT Annuity : In this mode, the responsibility for construction, operation, finance and maintenance rests with the concessionaire and the toll collection responsibility rests with NHAI. All construction and annual maintenance costs are initially borne by the concessionaire and the same are fully reimbursed by NHAI by way of annuity payments determined at the time of bidding.


What is BOT Toll & BOT Annuity ?

Structure of the Report

The report consists of following chapters: Introduction Planning Financial Management Award of Projects and the Concession Period Execution of Projects Revenue from Toll and Premium Monitoring of Projects Conclusion



Audit Objectives• Whether project identification/prioritization was done in a transparent

manner; • Financial Management of funds was sound and mobilisation of

resources was efficient.• Whether the bid evaluation procedures were well established and

functioning; • Whether the projections made in DPR/ Feasibility Report were sound and

borne out by subsequent events; • Whether the concessions were awarded on equitable basis and in the

public interest; • Whether projects were completed within estimated cost, desired

timeframe and that public/Govt. interest was adequately protected; • Whether the revenue management system in toll collection was effective. • Whether suitable mechanism for monitoring of projects was established

at Ministry as well as at NHAI during execution and O&M stage.

Review of DPRs/Feasibility Report, Sample Surveys and Statistical Analysis Reports.

Review of records of various phases of NHDP, selection of stretches under respective phases, appraisal of projects at various levels viz. Authority/Ministry, PPPAC, EoGM/GOM/CCI etc.

Terms and conditions of Model Concession Agreement and other related agreements

Traffic and Revenue assessments and projections. Departmental, technical and financial estimates prepared as per DPRs System of evaluation of bids Work Plans of NHDP and Budget Provision for release of funds to MoRTH/

NHAI Operation and Maintenance (O&M) for project implementation. Financial Management system of NHAI


Audit methodology and Criteria

• The main criteria used for identification of road stretches under Phase I & II was the development of Golden Quadrilateral and the north-south, east-west corridors. The criteria used for identification of road stretches under other Phases (III, IV & V) were requisitioned. However, no information was provided on criteria used for identification / prioritization of stretches.

Ministry stated that road stretches were selected on the basis of availability of land, traffic volume etc.

Work Plan, Targets and achievement

GOI constituted BK Chaturvedi committee to resolve procedural impediments to NHDP as well as take a holistic look at financing needs and arrive at a financing plan.

The B.K.Chaturvedi Committee Report (27 August 2009) suggested a work plan for 2009-10 to 2013-14 wherein NHAI should award at least 21,000 Km over the first three years so as to achieve the objective of constructing 7000 Km per year (equal to 20 Km per day). This work plan was approved by MoRTH in November 2009

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Chapter II: Planning

NHAI did not achieve the target of widening and up gradation of National Highways @ 20 Km per day during the last four years. Average achiev33ement ranged between 3.06 Km to 17.81 Kms per day during 2009-10 to 2013-14.

Corporate or Strategic plan of NHAI Till 2009, NHAI did not have a Corporate or Strategic plan for systematic

implementation of NHDP. Although NHAI drew up a corporate plan in 2009; the same did not include

any strategy, procedures or guidelines for timely implementation of highway projects.

The corporate plan drafted by NHAI dealt mainly with restructuring the administrative setup of NHAI by creations of RO’s and decentralization of power.


To achieve the targeted length as per the work plan, a financing plan for the year 2009-10 to 2030-31 was prepared by BK Chaturvedi committee in 2009.

Position of Financial Plan for the last five years ending 2012-13

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Chapter III : Financial Management

Year Projected Construction expenditure as per FP based on B. K. Chaturvedi Committee

Percentage of actual work done/ awarded with reference to projected targets

Actual project construction expenditure

Borrowing as per FP recommended by B. K. Chaturvedi

Actual borrowing Percentage of actual borrowing to proposed borrowing

12 3 5

6 7 8

2008-09

- - -

1631 2304.01 141.26

2009-1013,423.00 26.46 11529.88

5336 1550.64 29.06

2010-11

16,419.00 45.72 13618.53

7455 2465.83 33.08

2011-1215,585.00 81.34 13280.01

9155 12511.52 136.66

2012-13 23,222.00 10.47 13996.28 21922 2902.07 13.24

Total

68,649.00 52424.70

45499 20703.18 45.50

NHAI did not spend the funds available as projected in the B.K Chaturvedi Committee Report. The length of roads awarded by NHAI was only 16036.81 km as against 42391 km projected. Despite this NHAI continuously resorted to borrowings leaving surplus cash balance.

Borrowings projected by B.K. Chaturvedi Committee and the amount actually borrowed by NHAI there against showed a mismatch that ranged between (-) 13.24 per cent and (+) 41.26 per cent.

Despite shortfall by 18.66 per cent in achievement of targeted length during the year 2011-12, the actual borrowing against approved borrowing was higher by 36.66 per cent. This was due to raising funds of `10,000 crore at the rate of interest of 8.20 percent and 8.3 percent during the year through Tax Free Bonds under Section 10(15) (iv) (h) of the IT Act.

It was also noticed that at the end of 31 March 2012, out of total surplus fund of ` 11002.11 crore, an amount of ` 9928.31 crore was kept as Fixed Deposits with banks by NHAI.

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Financial Management (cont.)

Procedure adopted for award of Projects under NHDP :- MoRTH first identifies the road stretches eligible for upgradation/widening

and then proposes their inclusion under NHDP. The proposal for approval is then submitted to the Cabinet Committee on Infrastructure (CCI). On approval by the CCI, MoRTH transfers the stretches so approved to NHAI for implementation.

DPR/Feasibility consultant and financial/legal consultants are appointed by NHAI and a draft CA is prepared based on MCA. The proposal is submitted through MoRTH to PPPAC & later to CCEA/CCI for final approval.

Projects are awarded to concessionaire after EOI/RFQ,RFP.

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Chapter IV :Award of Projects and determination of Concession Period

• Mode of delivery of NH Projects :-– In its 2009 report, the B.K.Chaturvedi Committee recommended a revised

strategy for implementation of road projects whereby all the three modes of delivery i.e. BOT (Toll), BOT (Annuity) and EPC are to be concurrently taken up rather than sequentially

– A road project prima facie not found suitable for BOT (Toll) could be implemented directly on BOT (Annuity) after approval of IMG.

– However, before implementing a project on EPC basis, it will be compulsorily tested for BOT (Annuity). In cases where there is no unanimity in IMG, the matter is to be placed before EGoM.

• Restructuring of projects– Restructuring includes combining of two projects, postponing

construction of part of a certain stretch, deleting of structures,, increasing the cost/VGF/Annuity etc. As per the PPPAC guidelines restructuring could be taken up only after the approval of PPPAC.

– Instances were noticed where the projects were restructured at RFP/RFQ stage and fresh RFQs were not invited which is indicative of non transparent/ non competitive bidding

– The projects were eventually awarded at higher VGF/TPC as against DPR12

Restructuring of Jaipur-Tonk-Deoli project ◦ Restructured from six/ four lane to four / two lane, due to inadequate

response from the bidders .The original estimated TPC was Rs. 1183.6 crore.

◦ NHAI restructured the project without obtaining the fresh approval of PPPAC/CCEA.

◦ Work was awarded at a TPC of Rs.792.06 crore with Rs.306 crore as VGF (38.63 per cent).Whereas the earlier project was approved without VGF.

Restructuring of Jalandhar-Amritsar project • The original project stretch of 69 kms was divided into two sections of

20 Kms (Section 1) and section of 49 Kms (Section 2) due to high stretched cost/non viability of stretch.

• Section 2 was four laned on BOT at a cost of Rs.437 crore in 2008. No decision about the remaining 20 Kms (section 1) was taken

• The cost of four laning the 20 km. stretch at 2008 rates was Rs.178 crore. NHAI is now considering six laning of this stretch at an estimated cost of Rs.523 crore.

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Restructuring of Kishangarh-Udaipur-Ahmedabad• Initially two separate sections (i) Kishangarh to Udaipur (315Kms)

and (ii) Udaipur to Ahmadabad (242.51Kms) were approved by CCEA in January 2009 and January 2010 at a TPC of Rs.3384 crore and Rs.1750 crore respectively.

• Subsequently in January 2011, when the bidding process was at an advanced stage of RFP, as per the advice of NHAI, MoRTH decided to take up these projects as one Mega project.

• The TPC of the combined project was Rs.5387.30 crore as against the TPC of two individual projects of Rs.5134 crore (Rs.3384crore + Rs.1750 crore), ie Higher TPC of Rs.253.30 crore.

• Though the project was awarded at a premium of Rs 636 Crore, the same could not materialise.

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• Restructuring of Kamptee – Kanhan and Nagpur Bypass• To make the project viable, NHAI added the maintenance and tolling of

already four laned stretch of Nagpur- Hyderabad section of NH-7 from Km 14.600 to Km 36.600 (22.015 Kms) as sweetener.

• The total construction cost of this stretch, completed by NHAI including Butibori ROB, was Rs.104.00 crore (Rs.80.00 crore + Rs.24.00 crore).

• Thus NHAI gave a positive grant of Rs.559.21 crore which worked out to 47.77 per cent of the TPC and is in violation of the ceiling limit of 40 per cent of the TPC imposed by the CCEA.

• The amount of excess grant works out to Rs.91.00 crore (i.e. 7.77 per cent of Rs.1170.52 crore).

• Restructuring of Kanpur-Kabrai – The Concession Agreement was entered into on a TPC of Rs.373 crore as

per the estimate of the final feasibility report (May 2010) which included the cost of Rs.21.76 crore for the grade separator and service road at Km 41.557.

– However, neither the CA had any provision for the grade separator (including service road at Km.41.557) nor was the cost of the grade separator and service roads excluded from the awarded TPC. 15

Capacity of the road / Design service volume Manual of Specifications and Standards for two/ four laning of National Highways

through PPP (May 2010) stipulates following parameters for augmentation of the facilities and upgradation of the project highway:

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Nature of Tarrain Capacity of road / Design service volume(in PCU per day)

Without paved shoulder With minimum 1.5 m paved shoulder

Plain 15,000 18,000

Capacity of Four-lane highway Nagpur-Betul and Lucknow Raebarelli projects were approved for four

laning on annuity basis, despite the fact that the minimum threshold limit of 18000 PCUs per day for four laning was not expected to be achieved in the next five to 12 years from the date of award. Unwarranted four laning of projects resulted in extra burden of ` 1724.10 crore on road users apart from increased user fee which is higher by 66.67 per cent for four lanes as compared to two lanes.

The following projects were approved for six laning on BOT (Toll) basis, despite the fact that the minimum threshold limit of 60000 PCUs per day for six laning was not expected to be achieved in the next 10 to 25 years


Sl. no. ProjectSuccessful

Bidder/Concessionaire

Average volume of

total traffic (year)

KmApproval of

CCI

Year of achieving Threshold

capacity for six lane #

Levy of toll by the

Concessionaire

1 Varanasi- Aurangabad M/s. SOMA ISOLUX

18407 (2010) 192.400 January 2009 2034

September 2011

2Kishangarh- Ahmedabad /

M/s GMR Infrastructure

Ltd35245 (2011) 555.500

September 2011

2022

Not started till August 2013

3

Aurangabad-Barwa Adda

M/s KMC

22000 (2012)*

218.75 March 2012 2024 Not started till March 2013

As per the procedure defined in MCA, the carrying capacity of the respective highway at the end of proposed concession period would be the guiding principle for determining project specific concession period and the year in which the design capacity would be reached would be the last year of concession. Concession period is the period during which the Concessionaire is entitled to collect toll/Annuity for the construction of project highway.

• NHAI worked out Concession period on the tollable traffic instead total assessed volume of traffic (which should be the total carrying capacity of the road) • This has resulted in fixing of longer concession period which would prove

beneficial to the concessionaire .• During these extended concession periods, the Concessionaires’ would

collect toll at least to the tune of ` 28095.54 crore, while the roads would become congested for the toll paying users

• Inconsistency in considering traffic volume- On the contrary, in other three cases (Agra- Aligarh, Raibareilly- Allahabad and Kishangarh- Ahmedabad) it was noticed that total traffic was taken for determining the Design Capacity/ Concession Period of the project. Thus there was no consistency in fixing the concession period based on traffic census. 18

Determination of concession period

Conditions precedent to be fulfilled by NHAI:1) Procurement for the concessionaire at least 80% right of way of the total area required for the project.2) Procurement of approval from railway authorities for construction of road over bridge/ under bridge.3) Procurement of permits relating to environment protection.

Financial Closure : is the date on which financing documenst for funding by lenders become effective and the concessionaire gets immediate access to such funds.

Appointed Date : is the date on which financial closure is achieved or an earlier date which both the parties may determine by mutual consent and shall be deemed to be the date of commencement of the concession period. All conditions precedent should either be fulfilled or waived before fixing the appointed date.


Chapter V :Execution of Projects

Out of 94 projects, although 60 projects were due to be completed by end of March, 2014, only 5 projects were completed within time. Delays in completion of projects against scheduled completion date ranged from six days to 1249 days.

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Chapter V :Execution of Projects

Types of delay Scheduled days Minimum delay in days

Maximum delay in days

Delay in signing CA (84projects)

45 days from the issue of LoA

3 days 373 days

Delay in Appointed date (35 projects)

180 days from the signing of CA

1 days 790 days

Delay in financial closure (35 projects, >100 days

delay)


2 days 1007 days

Delay in getting RoB approval 76 projects


43 days 1946 days

Environmental Clearance. 72 projects


26 days 1350 d ays

Withheld amount account• In Six laning projects, toll collected is deposited in Escrow Toll Collection Fee Account to be

utilized for construction of the project highway. In case the Concessionaire defaults in achieving milestones, the toll will be deposited in a separate escrow sub account i.e. “Withheld Amount Account”.

• Such withheld amount will not be released till the Project Milestone immediately after the latest defaulted Milestone is achieved.

• Interest accrued on the same shall be disbursed to NHAI under all circumstances i.e. even if the Project milestone is not achieved, due to Authority default.

• In case of four projects, an amount of Rs.2084.59 crore was not withheld or was prematurely released to the Concessionaire.

Partial Tolling CA (prior to 2006-07) provides that the Concessionaire would be entitled to collect toll on the

project highway after completing at least 50 km of continuous stretch and in case the Concessionaire defaults in completing the entire project highway within the schedule project completion date, any fee notification issued earlier for levy of toll on part completion, would be de-notified immediately. Fresh fee notification would be issued only after completion of the entire project

NHAI allowed tolling on four partially completed stretches though the projects were not completed on scheduled completion dates. The fee notifications issued were not de-notified, & resulted in extra burden on the road user’s Rs. 161.67 crore.

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Punch List Items IE/IC can issue a Provisional Completion Certificate(PCC) on substantial

completion of the project. The PCC shall contain a list of outstanding items (i.e. the Punch List).

All items in the Punch List shall be completed by the Concessionaire within 90/120 days of the date of issue of the PCC and for any delay thereafter, NHAI shall be entitled to recover damages from the Concessionaire.

Out of 94 projects, PCC was issued in 33 completed projects with Punch List items. NHAI however did not take action to levy damages of Rs.69.42 crore in 13 projects.

Change of Scope (CoS) MCA provides that for execution of additional works and services not included in

the scope of the project, the costs arising out of any change of scope order issued during the Concession period shall be borne by the Concessionaire subject to a ceiling limit prescribed as a percentage of the project cost and thereafter would be reimbursed by NHAI.

CoS was observed in 23 projects The financial impact of positive and negative works out to ` 856.80 crore in 22

projects and ` 37.72 crore in 6 projects, respectively.

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Utility Shifting As per MCA, the shifting of utility work like electricity lines, water

pipe lines should be carried by the concessioner with the assistance of NHAI.

Based on the estimates prepared by the respective state government agencies the work is got done by the concessioner and the cost of work is reimbursed by NHAI to the concessioner.

Audit examination revealed wide variations between the cost estimated by the DPR consultant and the actual cost incurred by concessioners. The variation ranged b/w 2.34% to 2831.43%

Variation in TPC TPC worked out by DPR consultant and approved by NHAI was

less than the TPC assessed by the concessionaire by Rs.36612.91 crore.

The higher TPC worked out by concessionaire allowed them to avail higher amount of borrowed funds.


As per Rule 3(2), of NH Fee Rules, 2008 NHAI is required to commence collection of toll within 45 days from the date of issue of provisional completion certificate or issue of toll notification, whichever is later. Required action for fee notification is to be initiated at least 120 days prior to likely date of completion of the project.

Out of 20 selected Annuity projects, six projects were completed and were eligible for toll collection. Audit scrutiny of these projects revealed as under:

In 6 Annuity projects, delay in achieving COD ranged from 101 days to 906 days which resulted in foregoing of toll revenue of ` 259.47 crore.

Delay in issue of toll notification, after the date of PCC ranged from 37 days to 596 days which resulted in foregoing of toll revenue of `157.65 crore.

In 3 annuity projects even after issue of toll notifications, delays were noticed ranging from 51 days to 214 days, resulting in forgoing of toll revenue of ` 13.72 crore.

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Chapter VI: Revenue from Toll

Additional Concession Fee MCA provides that the concessionaire shall pay to NHAI additional concession fee

to be calculated as specified in the respective CAs in case of six laning projects. NHAI can conduct traffic sampling for continuous seven days to check the veracity of the Concessionaires’ statement

In three six laning projects, short realisation of additional concession fee amounting to Rs.29.79 crore was noticed

Toll revenue of ` 303.62 crore diverted as investment rather than being spent on construction work

MCA as well as the Escrow Agreement provides that the withdrawals from the Escrow account during the Concession period can only be appropriated as per chronology specified in the CA such as taxes due, construction of the project highway, payment of Concession fee etc., and if any balance available, it can be utilised as per the instruction of concessionaire.

In two projects (Delhi Agra and Pune Satara) toll revenue amounting to Rs.303.62 crore was used for investment rather than construction work of the projects.

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Inadequacies in accountability• Substantial manpower (officers and officials) of NHAI was on deputation

from various government departments. The ratio of persons on deputation to regular employees was 83:17 as at March 2013. NHAI suffers from lack of continuity/ institutional memory and is deprived of the services of experts in the field of project management.

Need to monitor project wise profitability NHAI does not maintain project wise accounts which are essential to assess

the profitability of a particular project. As such, it was not in a position to assess whether its decisions to go in for improvements to particular stretches were economically viable and profitable. NHAI was also not in a position to provide accurate information to its senior management or MoRTH which could be used while preparing future plans or to assess justification for revenue sharing.

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Chapter VII : Monitoring of projects

Independent Engineer (/IC)• As per MCA the IE is to be appointed within 90 days from the

date of signing of CA.• Delays were noticed in appointing IC/IE ranging from 6 days to

725 days in 84 out of 94 selected projects

Safety Consultant (SC)• As per MCA the SC is to be appointed within 90/120 days from

the date of signing of CA.• Delays were noticed in appointing SC ranging from 34 days to

1408 days which resulted in compromising with the safety aspects required during the pre-construction as well as during the construction period.

• In 19 CAs there was no provision for the appointment of Safety Consultant at all.

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Premature release of grant • In BOT (Toll) projects, Equity support (VGF) shall be due and payable to the

Concessionaire after it has expended the prescribed percentage of Equity, and shall be disbursed proportionately along with the loan funds thereafter remaining to be disbursed by the Senior Lenders under the Financing Agreements and should not be in material breach under the CA.

• In six projects, Audit noticed that the Authority prematurely released grant amounting to Rs 769.53 crore due to treating advance to EPC contractor as expenditure and inclusion of loan amount already released while working out the pro-rata amount of loan remaining to be released while calculating the amount of grant.

Non Maintenance of the Project Highway MCA provides that the Concessionaire shall operate and maintain the Project Highway

in accordance with this agreement either by itself or through the O&M Contractor. Further, it provides for damages for breach of the same at higher of (a) 0.5 per cent of Average Daily fee, and (b) 0.1 per cent (zero point one per cent) of the cost of such repair or rectification as estimated by the IE.

In five projects an amount of Rs.62.93 crore stood recoverable for non maintenance of project highway by the concessionaire.

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Non-Setting up of PPP Project monitoring units ‘Institutional mechanism for monitoring of PPP projects’ issued

(August 2012) by Planning Commission and provides for setting up of a two tier mechanism. ◦ PPP Monitoring Unit (PPPMU) at NHAI level◦ PPP Review Unit (PPPRU) at MoRTH.

Based on the reports furnished by PPPMU to PPPRU the latter was required to send quarterly reports to Planning Commission with a copy to Ministry of Finance.

Planning Commission was required to prepare a summary of these reports along with recommendations relating to further action/improvements which were to be placed before CCI.

Audit observed that NHAI did not set up PPPMU till February 2014. As regards MoRTH, reply with regard to setting up of PPPRU was awaited (February 2014).

Recommendation 1: Transparent objectives and criteria need to be framed while identifying and selecting the road stretches for up gradation.

Recommendation 2: Timelines for approval of phases of NHDP/approval of projects need to be formulated and appropriate monitoring mechanism devised with identified responsibility centres and timelines.

Recommendation 3: NHAI may develop an effective financial management system so that inflow of funds can be synchronised with the requirement and avoid surplus/idle funds.

Recommendation 4: While restructuring projects, technical and financial feasibility may be strictly adhered to and cost of the project should be revised with due diligence. Concession period after restructuring should also be determined as per revised projections of the traffic. Restructured projects should go through fresh bidding process to ensure competitiveness and transparency.

Recommendation 5: At the time of up-gradation of the projects from 2-lane to 4-lane and from 4- lane to 6-lane, the Manual for Specification and Standards may be followed consistently.

Recommendation 6: At the time of determining the concession period, NHAI may ensure consistency in adoption of the norms for traffic i.e. total traffic or tollable traffic.

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Recommendations

Recommendation 7: NHAI may have improved co-ordination with the state governments and increase the effectiveness of its Land Acquisition Units so that land can be handed over within the scheduled time and projects can also be completed without delay.

Recommendation 8: NHAI may consider including the estimated cost of utility shifting in the TPC for the project itself rather than reimbursing the cost of execution to the concessionaire in order to avoid large variations. Recommendation 9: NHAI would need to initiate timely action for issue of fee notification and plan in advance for levy of toll fee to avoid loss on account of delayed collection of toll.

Recommendation 10: NHAI needs to critically review the system of declaration of Appointed Date and also design a mechanism to ensure that the concessionaire does not derive undue advantage of the funds at its disposal by diverting toll revenue into financial instruments rather than investing them for approved project purposes.

Recommendation 11: NHAI needs to ensure that norms for release of grant are consistent across concession agreements. Due diligence needs to be exercised over release of grants to concessionaire to avoid premature release of grant.

Recommendation 12: MoRTH/ NHAI needs to urgently set up Performance Review Unit/ Projects Monitoring Units and ensure that the requisite reports are placed before the CCI. 31

Recommendations (cont.)

Thank You


MoRTH had set a target for widening and up gradation of Highways at 20 km per day. Achievement there against during 2009-10 to 2012-13 ranged between 3.06 km and 17.81 km per day despite availability of sufficient funds.

Inconsistency in adopting carrying capacity/tollable traffic for determining the Concession Period by (NHAI) resulting in fixing higher concession period, consequently unwarranted burden of ` 28095.54 crore (NPV: ` 3233.71 crore) on road users by way of toll for the extended period apart from leading to traffic congestion towards the end of the concession period.

NHAI incurred an expenditure of ` 856.80 crore on account of change in scope of 23 projects, out of which ` 662.53 crore was due to faulty Detailed Project Report (DPR)/Feasibility Reports

NHAI could not start toll collection in six completed annuity projects due to non-achievement of Commercial Operation Date (COD) in time resulting in non-realisation of estimated toll revenue of ` 259.47 crore. Toll of ` 171.37 crore could not be collected due to delay in issue of toll notification (` 157.65 crore) and failure to commence toll collection after issue of toll notification (` 13.72 crore) for these projects.

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Main audit findings

Two projects were approved for 4-laning despite the fact that the minimum threshold traffic was not expected to be achieved in the next five to 12 years. Unwarranted 4- laning would result in extra cost of construction ` 1724.10 crore which was avoidable apart from increased user fee to be paid by road users which is higher by 66.67 per cent for 4-lane as compared to 2-lane.

The Total Project Cost (TPC) worked out by the concessionaires was higher as compared to TPC worked out by the Authority. TPC worked out by the concessionaire ranged from 0.32 per cent to 223 per cent, which benefited the concessionaire with lesser residuary risks.

The projects considered unviable on Build Operate and Transfer (BOT)-Toll either by DPR consultants/Authority/Public Private Partnership Appraisal Committee (PPPAC) or during bidding process were re-structured after making major changes in the initial project parameters to make them viable, but fresh RFQ were not invited in such cases, which showed lack of transparency and competitive bidding.

NHAI’s decision to allow tolling on four partially completed stretches resulted in extra burden on the road users amounting to ` 161.67 crore.

Toll amount of ` 902.89 crore collected by the concessionaires in three 6-laning projects was not transferred to 'withheld amount account' though milestones were not achieved.

Main audit findings (cont.)

In four projects, NHAI prematurely released grant amounting to ` 769.53 crore by considering amount of advance as expenditure and by incorrectly working out the pro rata amount of loan remaining to be released while calculating the amount of grant.

NHAI is managing its staff strength mostly with officials on deputation from

other government departments and by appointing consultants. Department of Personnel & Training (DoPT), Ministry of Personnel, Public Grievances & Pensions, Government of India, directed MoRTH in November 2009, to ensure that within two years, the structure of NHAI be reformed to provide for its own independent cadre through direct recruitment and absorption of deputationists. However, as at the end of 31 March 2013, the ratio of persons on deputation to regular employees was 83:17.

NHAI did not adhere to basic accounting principles and Accounting Standards issued by the Institute of Chartered Accountants of India. Resultantly, the Profit and Loss account did not depict overall profitability of NHAI.

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Main audit findings (cont.)

MoRTH first identifies the road stretches eligible for upgradation and then proposes their inclusion under NHDP.

The proposal is submitted to CCI/CCEA. On approval by CCI/CCEA, MoRTH transfers the stretches to

NHAI for implementation. NHAI engages the DPR/ Feasibility consultant. NHAI appoints financial and legal consultant to prepare DCA. The complete proposal is submitted to PPPAC through MoRTH

for approval. On approval by PPPAC the project is submitted to CCI/CCEA

for final approval. The process of engaging a concessioner commences which

consists of RFQ, RFP. After award, the bidder forms a SPV who executes the work.


Procedure For Award of Projects Under NHDP

Sl. No. Records/files/information sought from MoRT&H

Status

1 Basis of selection of stretches taken up for upgradation and norms/criteria adopted for identification/prioritization of stretches under NHDP phase II to V

No records were furnished.

2 Approval of NHDP Phases II, III, IV & V

Only one file related to approval of phase IV (15000 km.) was furnished.

3 Work plans as well as financial plans of NHDP for the last five years

Work plans for two years 2011-12 & 2012-13 were only furnished.

4 Project specific files Only 10 files out of 31 requisitioned were furnished & these were either incomplete or contained partial information.

5 Quarterly reports of PPP PRU (Project review unit) for the last five years

No records were furnished.

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Scope Limitation

Documents

O/o Principal Director Commercial Audit & MAB-I New Delhi Indian Audit & Accounts Department1