Home / Industry / Two proposals to bail out road project developers cleared

New Delhi: In a bid to bail out developers of road projects, the government on Wednesday cleared two proposals: one enables an early exit from road projects that have been completed, and the other provides financial support for those that are stuck.

In the first policy proposal cleared by the Cabinet Committee on Economic Affairs, the developer will be able to divest 100% equity, two years after the completion of a project.

“It is relevant to note here that during the last few years, PPP (public-private partnership) projects have not been able to attract bids; one of the primary reasons being lack of availability of equity in the market among qualified bidders. This would help unlock equity from completed projects making it potentially available for investment into new projects," said a government statement released on Wednesday.

Earlier, only developers of projects awarded after 2009 were allowed to exit two years after the project was completed. However, developers of projects awarded before 2009 had to remain locked in till the end of the concession period.

The cabinet decision, which harmonises policy, could potentially free up 4,500 crore of equity locked in 80 Build, Operate and Transfer (BOT) projects, which were awarded under the PPP route prior to 2009.

“Once this is unlocked and is reinvested in new projects, this could support 1,500km of new highways in PPP mode, thus help in reviving the response to BOT projects," the statement added.

The second policy proposes to infuse funds into road projects that are nearing completion but are stuck due to lack of additional equity or the lender’s inability to disburse more funds.

“NHAI (National Highways Authority of India) has been authorized to provide funds to such projects from within its overall budget/corpus on a loan basis at a pre-determined rate of return. This loan is to be recovered along with interest as the first charge from the toll receipts immediately after completion of construction," the statement said.

The centre said that NHAI has been directed to develop a robust mechanism to determine eligibility of the project as also the extent of funds required to complete projects in a time-bound manner.

The government hopes to revive 16 highway projects through this “special intervention".

Mint reported on 12 May that the government is likely to approve these two policy measures that have been vigorously pursued by the roads ministry in a bid to revive private-sector interest in road projects. The ministry has set itself a target of awarding 10,000km of road projects in the current fiscal, including 3,000km via the PPP route. It had awarded nearly 8,000km of road projects in the year ended on 31 March, but the PPP route had accounted for only 750km. “This is a good move to break the deadlock. It’s good for the sector and the stakeholders. However, the devil will be in the detail which will have to be examined to understand the effectiveness of the decisions taken," said Parvesh Minocha, group managing director, infrastructure consultancy Feedback Infra Pvt. Ltd.

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