Oil income provided the resources necessary to implement construction projects which includes wide spectra of projects in highways, railroads, ports and airports. A small change in oil price would significantly affect the future of these projects; with oil prices sinking down to $40 per barrel, the contractors of construction projects would wonder whether these projects will ever be implemented.
Minister of Roads and Urban Development has underway construction of 8,100 km of express ways and highways, which would have vague prospect should the oil price plummets hit the income and with it the resources at the disposal of the ministry to pay for the large bills of construction. There is speculations that larger parts of these massive construction projects would be postponed to the next year; these issues has only raised in the wake of oil price cuts. The cuts in oil incomes had reduced already 11 per cent of the overall budget during recent weeks, which would negatively affect Minister of Roads and Urban Development subsidiary companies and contractors. The liabilities of the ministry to contractors would also be a challenge for the ministry, since the shortage of income would multiply these liabilities and debts. As projects in the government will never end, government will always remain a major debtor to private sector.
Finding alternative sources of income and financial resources to pay for massive construction projects gains importance for the next year. Lower oil incomes would also hit the upkeep and maintenance of current infrastructures of the country. Abbasali Akhundi, Minister of Roads and Urban Development, has been quoted to have said that the current roads and highways had an estimated value of $57bn, which would require huge amount of resources as well for maintenance of such valuable assets.
Akhundi also was quoted to say that 34,000 km of roads provided essential corridors of transportation, for which he believed, should be allocated enough budget for maintenance. “While 45,000 km of major roads and 100,000 km of roads connecting villages and rural areas have seen no maintenance and upkeep practices,” he had said.
Ali Azad, the Secretary of Raod Construction Companies Association said projects across the country were implemented according to the budget and resources available; “naturally, with cuts in oil incomes, construction projects would also cease to exist; an alternative mechanism proposed to government is to collect tolls for passage in the roads, to help recuperate the cost of road construction and maintenance,” he told Mehr News. “As in utilities, people should simply pay for using the roads; however, collecting tolls by mounting stations in different parts of the highways would be inconvenient; a convenient way is to allocate a percentage of gasoline price to the road construction projects,” he said.
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