New Delhi: The road ministry is working on introducing what an official called a “simple tweak" in the model concession agreement with builders so that they don’t lose out because of project delays caused by the government.

In yet another pitch to bailout developers of languishing road projects, the ministry is mulling increasing the construction period of a project in proportion to the delay caused by official lapses.

These would cover slips such as delays in acquiring land or securing environment or forest clearances, said two road ministry officials familiar with the development. Both declined to be named.

With delays being accounted for in the increased construction period, it will not eat into the concession or tolling periods. This will allow the developer to charge toll for the period agreed on in the model concession agreement.

The concession agreement is the contract that sets the terms of execution of a project and is signed between the concessionaire and the government agency, in this case the National Highways Authority of India (NHAI).

“Projects where construction has not started, this proposal is viable. However, for projects where construction has begun and cost overruns and interest costs are substantial, the government may find it difficult to resolve those projects through this mechanism," said Abhaya Agarwal, a partner at EY Llp who oversees the infrastructure practice at the consultancy. “Where a developer has liquidity and financial closure issues also, this may not work."

The proposal is being considered even as three of the road ministry’s proposals are either pending with the cabinet or have been withdrawn because of reservations expressed by other ministries.

“This proposal steers clear of providing monetary relief. It’s a simple tweak to account for the delay in the project taking off due to the government’s inability to fulfil the conditions in time," said the first official.

“We are looking to adjust the delay in the construction period, thereby allowing the developer to toll the road for the period originally agreed in the contract so his revenues do not suffer," he added. The ministry has floated three other cabinet notes in the last three months, which are yet to go through. It has been seeking an easy exit for developers of projects awarded before 2009 by allowing them to sell their equity two years after project completion.

Another two proposals have met with some reservations—one proposing a reduction in the penalty levied on a developer seeking to exit a stalled project where the government is responsible for the delay and another calling for government funds to be infused into lapsing projects where half the construction work has been completed.

These proposals are part of a government initiative to look at measures which could make the road sector attractive for private investment and unlock equity in stalled projects.

For the past two years, most road projects have been awarded under the government-funded engineering procurement construction model in the absence of private sector interest.

In the fiscal year ended 31 March, the road ministry had awarded 8,000km of road projects, but less than 800km was covered under the public-private partnership route.

My Reads Logout