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Report Rnhai
Report Rnhai
Restructuring of
National Highways Authority of India
Published by
The Secretariat for the Committee on Infrastructure
Planning Commission, Government of India
Yojana Bhawan, Parliament Street
New Delhi - 110 001
www.infrastructure.gov.in
March 2008
Contents
I. Executive Summary 05
II. Report on Restructuring of NHAI 10
1. Context 10
2. Institutional Strengthening Initiatives in Progress 11
3. Setting up an Inter-Ministerial Committee (IMC) 12
4. Meeting of Committee of Secretaries (COS) 12
5. Vision of NHAI 13
6. The Business Model 14
7. Existing Systems and Processes 14
8. Past Initiative 18
9. Key priorities in Institutional Strengthening 19
10. Strengthening of NHAI Board 19
11. Strengthening the Organization Structure 23
12. Regional Set-up 29
13. Strengthening of the Human Resource Management 30
14. Enhancement of Systems and Processes 32
15. Quality Assurance 36
16. Conclusion 37
17. Recommendations 38
List of Annexures
Annexure 1:
Existing Structure 43
Annexure 2:
Proposed Structure 44
Annexure 3:
Note on CAG's observations 45
Secretariat for Committee on Infrastructure
Preface
This Report is aimed at institutional strengthening Committee on Infrastructure which commended the
of the National Highways Authority of India same for approval of the Government.
(NHAI) with a view to making it a
multidisciplinary professional body with high In particular, the Report recommends the vision
quality expertise in financing and contract statement of NHAI as follows:
management. “ To meet the nation's need for the provision and
maintenance of National Highways network to
The NHAI is responsible for the development, global standards and to meet user's expectations in
maintenance and management of National the most time bound and cost effective manner,
Highways entrusted to it and for matters connected within the strategic policy framework set by the
or incidental thereto. It is mandated to implement Government of India and thus promote economic
the National Highways Development Programme well-being and quality of life of the people.”
spread over seven phases with investment of about
Rs. 2, 20,000 crore (USD 55 billion) over a period The Report recommends retention of NHAI's
of seven years. This magnitude of work required business model of outsourcing major activities and
greater autonomy and delegation of powers to makes specific recommendations with respect to
NHAI for approval of individual projects within the the enhancement in the strength of the number of
overall programme including the financing Directors in the Board and other senior level
structure approved by the Government. officials. It also clearly delineates the roles and
responsibilities of each Member. The Report
In the above context, the Committee on proposes the creation of separate cells for Project
Infrastructure (COI) chaired by the Prime Minister Appraisal, Planning, Quality Assurance,
directed that restructuring of NHAI should be Standardisation and R & D, Contract Management,
undertaken and an Inter-Ministerial Committee Legal and Arbitration and Road Safety. The Report
(IMC) under the chairmanship of Secretary, Road also makes recommendations in important areas
Transport and Highways with Secretary, such as delegation of powers, documentation,
Department of Economic Affairs (DEA), Chairman, capacity enhancement, training, etc. It also
NHAI, Adviser to Deputy Chairman, Planning recognizes the principles of checks and balances by
Commission, Shri D.P. Gupta, former Director separating project implementation from the
General (RD) and Shri Deepak Das Gupta, former functions of Member (Finance) and Member
Chairman, NHAI as Members, to submit (Technical). These measures would sufficiently
recommendations for restructuring of NHAI. enhance the institutional capacity of NHAI and
enable it to establish world class road
After extensive deliberations and consultations with infrastructure.
experts, the Inter Ministerial Committee submitted
its Report on restructuring of NHAI. The Report The Report has since been approved by the Union
was also considered by the Board of NHAI. Some Cabinet for adoption and implementation.
of the unresolved issues were referred to the
Committee of Secretaries under the chairmanship
of Cabinet Secretary and its recommendations were
suitably incorporated in the Report. The Report was (Gajendra Haldea)
placed before the Empowered Sub-committee of the
Abbreviations
1. The Committee on Infrastructure (COI) proposal for restructuring with the following
under the Chairmanship of Prime Minister had composition:
taken following decision in respect of the
institutional strengthening of NHAI in its (i) Secretary (Road Transport & Highways)
meeting held on January 13, 2005: - Chairman
(ii) Secretary (DEA) or his representative
“In order to provide autonomy and delegate
- Member
more powers to NHAI for approval of
individual projects within the overall (iii) Chairman, NHAI
programme including the financing structure - Member
approved by CCEA, it is necessary to build (iv) Adviser to Deputy Chairman, Planning
institutional capacity of NHAI by making it a Commission
multidisciplinary professional body with high - Member
quality financing management and contract
(v) Shri D.P. Gupta, DG (RD) (Retd) as
management expertise.”
Technical Expert in Highway Sector
- Member
2. In pursuance of the above decision of the
Committee on Infrastructure (COI), a (vi) Shri S. Sundar, Secretary to Government
comprehensive proposal was formulated by of India (Retd) as Management Expert
NHAI for appropriate restructuring/ conversant with highway sector
strengthening of NHAI. In a review meeting - Member
held on April 11, 2005 the Deputy Chairman, (vii) Shri Deepak Das Gupta, Chairman, NHAI
Planning Commission suggested that a seminar (Retd)
may be convened where the proposal for - Member
restructuring may be discussed and deliberated
upon by the stakeholders. A seminar was 4. The proposal was discussed extensively
convened on May 16, 2005 which was attended in two meetings of the IMC. In the meantime
by various stakeholders from the road sector, the Planning Commission also got another
financial institutions, academic institutions, etc. report prepared on the restructuring of NHAI
The suggestions received from the stakeholders by engaging a consultant from Indian Institute
were noted and the proposal was suitably of Management, Ahmedabad.
modified where required.
5. Both these proposals were then discussed
3. Subsequently, on the suggestion of the in detail by IMC in its subsequent seven
Planning Commission, an Inter-Ministerial meetings. Based on the discussions in the
Committee (IMC) was constituted on June meetings, IMC prepared its report which was
24, 2005 by the Department of Road then submitted to the Planning Commission in
Transport and Highways for finalizing the the first week of February 2006. The Planning
6. This report and the issues raised by the 9. The Government has since approved the
Planning Commission were then discussed in proposal of Department of Road Transport and
the Empowered Sub-committee of COI in its Highways regarding restructuring of NHAI
meeting held on February 8, 2006 under the with the directions that powers and
chairmanship of the Deputy Chairman, responsibilities for approving variations in
Planning Commission. It was decided in the contracts shall be exercised on the basis of
meeting that views of the Finance Ministry guidelines to be framed by the Ministry of
may also be obtained on these issues. The Finance.
Finance Secretary in his letter dated March 31,
2006 conveyed the views of the Finance RECOMMENDATIONS:
Ministry and generally concurred with the
proposal but suggested that the approval of 10. Based on the recommendations of the
NHAI's Board should first be taken before IMC and the decisions taken in the COS, the
placing the proposal before the COI. Approval final recommendations made for approval of
of NHAI's Board was then taken in its 59th COI are as follows:
meeting on May 25, 2006.
(i) The vision statement of NHAI to be:
7. A meeting of Committee of Secretaries
was held under the chairmanship of Cabinet “To meet the nation's need for the
Secretary on June 16, 2006 to discuss the provision and maintenance of National
issues raised by the Planning Commission. Highways network to global standards and to
The meeting was attended by Secretary, meet user's expectations in the most time
DoRT&H, Finance Secretary & Secretary bound and cost effective manner, within the
(Expenditure), Chairman, NHAI, Member strategic policy framework set by the
(Administration), NHAI, Additional Secretary, Government of India and thus promote
Cabinet Secretariat, Advisor to Deputy economic well being and quality of life of the
Chairman, Planning Commission, Advisor people.”
(Transport), Planning Commission, Joint
Secretary, Cabinet Secretariat and Director, (ii) NHAI's business model of outsourcing
Cabinet Secretariat. The issues were discussed major activities to be essentially retained.
in detail by the Committee of Secretaries. NHAI Board to evolve an appropriate
procedure/system of sample test checks by
8. The final report based on the Project Directors for ensuring the veracity of
recommendations of the IMC and decisions the bills prepared by the Supervision
1.2 The Government of India (GoI) is now 1.4 The new phases of NHDP will be
considering entrustment to NHAI of the implemented mainly through private sector
responsibility of implementing a greatly participation, either as BOT (Toll) projects or
expanded National Highways Development BOT (Annuity) projects. This necessitates
Programme over seven phases with investment setting up of a vibrant Public Private
of over Rs.2,20,000 crore for the next seven Partnership (PPP) programme. For a PPP
years. NHDP Phase III has already been centered implementation strategy to be
approved for upgradation of 4000 Km to 4 successful, processes, systems and attitudes in
laned highways and preparation of Detailed NHAI would need reorientation. This has
Project Reports (DPRs) for another 6000 Km implications for project size, project
and the remaining phases are in different structuring, time bound pre-construction (land
stages of approval.
5.2 IMC was of the opinion that the vision of (ii) Seek viable options for procurement and
NHAI should be recast to reflect the changing involvement of the private sector in the
context of highways development. The role of development, operations and maintenance
the Government would be to set the policy of roads
framework that provides for the requirements
of socio-economic development and quality of (iii) Improve road safety
life of the people. Within this broad policy
framework, NHAI should act as a (iv) Encourage research and develop effective
professional, commercially-oriented liaison with institutions involved in
organization. Operationally this would imply research and development
that NHAI should focus on cost-effective and
timely delivery, within the policy framework (v) Become a multi-disciplinary professional
set by the government. body with high quality financing
management and contract management
5.3 IMC recommended the following vision expertise
statement for NHAI:
(vi) Provide en-route facilities, congenial
“To meet the nation's need for the environment including landscaping and
provision and maintenance of National tree plantation to ensure safe and
Highways network to global standards and to pleasant driving
meet user's expectations in the most time
(ii) Preconstruction activities such as land (c) The check test of the repeat test
acquisition, shifting of utilities, obtaining measurements, if requested for by the
environment clearance and permission for tree Project Director/ technical officer, have
cutting, securing approval of the railways for been conducted in their presence by the
construction of ROBs. Engineer to verify the measurements
recorded in the Measurement Books.
(iii) Interacting with the State Governments
and other Departments of the Central (d) The abstract Measurement Book is neatly
Government for resolving any issues holding and correctly drawn by the Supervision
up the progress of work. Consultants and have been signed by the
Team Leader.
(iv) Attending meetings called by the State
Nodal Officers for review of progress of (e) The items, quantities and rates, etc., in
works and removal of bottlenecks, if any. respect of the executed items/ quantities
(vi) Legal and Arbitration Cell IMC felt that there should be a Group that
supports the strategic functions of top
(vii) Safety Cell management. This Group will act as the
corporate nerve centre for planning and
11.2.1 Project Appraisal Cell quality assurance. It will take initiatives that
require top level championing and cut across
A separate Project Appraisal Cell headed by functional divisions. IMC recommended
a Financial Analyst (of the rank of CGM) and creation of a Planning Cell and Quality
comprising a multidisciplinary team Assurance Cell with the following
specializing in the areas of finance, statistical responsibilities:
assessment and transport economics with the
capability to undertake comprehensive project Planning Cell
appraisal of PPP projects is proposed to be
created. While the basic financial appraisal Planning of new projects and schemes
would continue to be done by external
financial consultants the Project Appraisal Cell Quality Assurance Cell
would critically examine the appraisals done,
particularly with regard to estimates of toll (a) Inspection of quality aspects of ongoing
revenue cash flows, estimation of costs and works including quality audit through
financial viability. The skill areas that are to external professional agencies
be enhanced directly and through retained
consultants are multi-disciplinary and include (b) Promoting key quality assurance
in-depth capability in viability assessment, initiatives
understanding of different BOT project
formats and related financial modelling. This Each Cell will be headed by a GM level
is particularly critical as NHAI will henceforth officer reporting to CGM(PQ) who will
be executing works primarily in the PPP directly report to the Chairman.
mode.
IMC noted that NHAI had already engaged
The Cell will be headed by the Financial independent professional organizations to
Analyst (rank of CGM) and located under undertake comprehensive quality audit of
Member (PPP). NHAI projects. The proposed cell would
provide inputs for technological and system
* This is to address coordination of queries/information requirement that cuts across departments. Hence queries/information requirement coordination where
there is clear co-relation with a specific individual department or functional area can be undertaken by the latter directly
(ii) One CGM (IT) for IT systems, 11.4 Negotiated contract hiring of
procurement of hardware/software, private sector experts
procurement of consultants for various
studies and service providers, Road 11.4.1 IMC was of the view that experts in
Information System, and Management areas of project appraisal, contract
Information System (MIS) and user management, etc. are highly paid in the
interactions. Two GMs to assist CGM market and it may not be possible for NHAI
(IT), one for MIS and monitoring and the to attract experts on public sector salaries.
other for IT systems management, IMC felt that a programme of the importance
including procurement of software and and size of NHDP must not be handicapped
hardware. because of non-availability of crucial skills.
(iii) Monitoring Cell headed by GM 11.4.2 IMC, therefore, recommended that the
(Monitoring & MIS) would report to NHAI Board may be empowered to induct
CGM (IT). The function of the private sector personnel especially for the
monitoring cell would be to monitor positions of Financial Analyst, Contract
progress of projects, highlighting issues, Management Specialist and Transport
bottlenecks, problem areas impacting Economist on contractual employment to
time and cost and requiring corrective perform specific roles on negotiated
action. The GM (Monitoring & MIS) is compensation basis.
expected to be familiar with IT enabled
systems, project management in the 11.5 Development of institutional
highways sector, resource based capabilities of partner institutions
CPM/PERT and other contemporary
project tracking techniques He would be IMC recognized that some State Governments
supported by two Managers and a are also developing State level institutions that
Statistician/Statistical Analyst.
Variations in contracts shall be dealt with on (iii) Improvements in the quality assurance
the basis of guidelines to be framed by the systems and methodologies
Ministry of Finance.
(iv) Promotion of standardization of
IMC specifically recorded two important methodologies and application tools
priority areas: Project Management covering
all aspects of the entire project development (v) Enhancement in the application of IT
cycle, and Information Technology as an technologies including web enabled
enabler to strengthen all the systems and systems, MIS, and databases
processes.
(vi) Incorporation of learnings from the
14.1 Project formulation, appraisal and expanding database of project
monitoring experiences (including DPR preparation,
bidding and actual implementation -
IMC recognized that project conceptualization providing opportunity for comparison of
and delivery skills (encompassing the entire pre-and post-facto estimations and
range of the project-related activities from activities)
feasibility assessment, design, pre-
However, the present situation assessment is (i) Full electronic connectivity between the
also reflective of certain concern areas offices of NHAI and its internal and
including the following: external stakeholders
(i) Meeting limited information needs (ii) An organisation-wide and secure intranet
with appropriate static and dynamic
(ii) Repeating data entry often times databases
(iii) Under utilization of the state of the art IT (iii) Integrated financial management, revenue
infrastructure collection, projects and contracts
management, procurement management,
(iv) Emphasis on technology and stand alone HR and payroll, electronic documents
applications, not on the enterprise management, groupware and workflow
(v) Limited on-line information flow from (iv) Creation of roads network database with
offices outside HO and offices within HO spatial and attributes based data through
etc. a mix of satellite imagery, aerial
Keeping in view the focus on future activities, photography and ground level validation
IMC recommended the following for future
course of action: (v) Effective use of CAD, GIS, and
Existing Structure
Board
Chairman
Inspection Cell
Proposed Structure
Proposed changes
Board
Chairman
P&Q Cells
• Monitoring
Cell
• Legal &
Arbitration
Cell
2. Evolve a system where Detailed Project Consultants of proven experience and repute are
Reports are reviewed before the engaged for preparation of Detailed Project
commencement of tendering process so Reports (DPRs). Following additional measures
as to avoid large variations, adoption of have been taken up for improvement of quality of
non-uniform specifications for similar DPRs.
site conditions, sub-standard construction
quality and inefficient project i) System of Peer Review of the Detailed
management on account of insufficient Project Reports and proof checking of
and inaccurate information/data contained designs of major structures by Proof
in the DPRs. Consultants have been put in place.
4. Include and invoke stringent provisions i) Stringent penalty clause provided in the
in the agreements against erring Agreement for major lapses of the Detailed
consultants to convey seriousness in Project Report Consultants.
action in view of the major omissions by
the consultants that led to substantial ii) Credentials of the Supervision Consultants
time and cost overruns. NHAI may also thoroughly verified before they are allowed
fix bid capacity for Project Supervision to bid. The Consultants are required to field
Consultants (PSCs) and ensure that the an entire new team for each project.
same key personnel are not proposed for
multiple projects. iii) Care is taken to ensure that the key
personnel are not proposed for multiple
projects. The list of key personnel of the
preferred consultants is circulated to all the
technical divisions for getting their
feedback.
6. Ensure better financial management and Two Chief General Manager level post in
closer monitoring of cash management to Finance recommended to be created, one to look
bring down the cost of capital as well as after resource mobilization and financial
cost reduction; toll notification and management and the other to look after accounts
collection system needs to be management.
systematized and made more efficient.
7. Avoid delays in issuance of gazette To ensure that toll notifications are issued in
notification for tolling, handing over of time:
site, finalization of site for the toll plaza
through better planning and timely action i) Draft notifications are sent to Ministry 90
to prevent loss of toll revenue. (Ninety) days before the expected date of
completion of the project.
8. Maintain its accounts on commercial i) Accounts are maintained as per the standard
principles in consonance with the accounting practices.
Generally Accepted Accounting Practices
ii) Internal audit manual and standard account
operating procedures have been prepared
and adopted for better financial control and
monitoring.