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Business News/ Politics / Policy/  Bailout plan in the works for developers of stalled road projects
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Bailout plan in the works for developers of stalled road projects

FM says the govt has to devise a way of allowing their developers to exit in order to revive these projects and hints at relaxing penalties

The government has announced an increased budgetary allocation of `70,000 crore to the infrastructure sector in the fiscal year starting April. Photo: Ramesh Pathania/MintPremium
The government has announced an increased budgetary allocation of `70,000 crore to the infrastructure sector in the fiscal year starting April. Photo: Ramesh Pathania/Mint

New Delhi: The government is working on a bailout programme to help developers of stalled road projects exit more easily, finance minister Arun Jaitley said on Wednesday.

Jaitley reviewed the highways sector on Wednesday and found that of the 77 road projects sanctioned by the earlier United Progressive Alliance government, more than 30 were non-starters.

Calling these projects a legacy issue, Jaitley said at an event that the government has to devise a way of allowing their developers to exit in order to revive these projects and hinted at relaxing the penalties.

“It is a complicated legal methodology of exit because they have to pay huge penalties to exit. So, a dying sector is killed further if you try to impose that. Therefore, how do you formulate a proper methodology by which they can exit and those who can execute those projects actually are able to come in?" Jaitley asked.

The highways ministry has submitted a proposal to allow developers of projects awarded even before 2009 to exit two years after the completion of the project through a simple stake sale, said a road ministry official requesting anonymity. Currently, this is allowed only for projects awarded after 2009.

The penalties will be reduced depending on who is accountable for delays in project execution, he added.

Jaitley also said that the government is “seriously" looking into putting a “lifeline" into highway projects where half the work has been completed.

The road ministry official quoted above said the finance minister had agreed to another proposal—that the National Highways Authority of India (NHAI) infuse funds into road projects where 50% of the physical work had been completed.

Jaitley, in fact, said that in the finance bill, a proposal has been included to pass a substantial part of the road cess to the highways authority, which could be used to execute this proposal.

“In my finance bill, there is now a proposal to pass on a substantial part in terms of cess for the highway authority which is going to go to almost 8, and 8 of cess actually means 80,000 crore going to the highway authority and part of it will go to the railways also and therefore, if you have a highway authority which has improved liquidity, so these incomplete projects can also be assisted by them by some funding mechanism," he said.

Currently the road cess on petrol and diesel is 6 per litre.

The government has also announced an increased budgetary allocation of 70,000 crore to the infrastructure sector in the fiscal year starting April.

The roads sector has struggled to attract private investment for nearly three years due to an economic slowdown and fall in traffic projections that affected revenue. The centre is keen to revive private investment by addressing some of the key issues flagged by the industry.

Meanwhile, the ministry has begun awarding road projects under the government-funded model called the engineering-procurement-construction (EPC) model.

The ministry has so far awarded 5,300km of road projects of which more than 4,000km has been done under the EPC route.

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Published: 26 Mar 2015, 12:33 AM IST
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