 "CCEA decisions: Road concessionaires allowed to sell out")
The move would facilitate faster completion of the projects, since there are many concessionaires not interested any longer in the projects they’d taken up and/or not able to achieve financial closure as the investment climate faces a downturn.
The Cabinet Committee on Economic Affairs (CCEA) approved a proposal to allow companies to buy out an existing concessionaire, provided lenders to the project agree and the substituting company takes at least 51 per cent of the equity.
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"It has been decided that existing concessionaires, both in case of completed and ongoing projects, be permitted to divest their equity in totality," an official statement said.
However, this will require consent of the National Highways Authority of India (NHAI).
The decision has been taken in view of the prevailing lack of interest among prospective bidders for highway projects under the public-private partnership (PPP) mode and the difficulties faced in achieving financial closure for awarded contracts in an already subdued investment climate, the statement said.
Lenders’ representatives, in consultation with the concessionaire, would invite, negotiate and procure offers, either by private negotiations or public auction or tenders for the takeover and transfer of highway projects.
The government admits it failed to evoke a good response for highway projects. "Looking at the previous year's achievement, a very ambitious target of award was set. Unfortunately, the response under PPP was extremely poor. No response was received in respect of many projects, even after repeated bid invitations," the offical statement said.
The Union ministry of road transport and highways has set a target of awarding around 9,000 km of road projects in 2013-14.
In addition to the overall economic downturn, changes in policy guidelines relating to environment and forest clearance have also had an adverse impact. A large number of projects awarded even during 2011-12 are yet to achieve financial closure, it added.
Developers are facing severe shortage of equity and, consequently, are unable to raise the required debt. Hence the poor response to PPP projects.
On the other hand, many investment companies with sufficient resources have shown interest in acquiring road projects but are either unable or unwilling to take up the construction risks. "Permitting buyouts by such entities, which will take over all obligations under the concession agreement, will help facilitate flow of resources for the revival of the road sector," it added.
NLC divestment
The CCEA also cleared the government's five per cent stake sale in Neyveli Lignite Corporation (NLC). This would help garner around Rs 450 crore to the exchequer. The decision has been taken despite the Tamil Nadu government protesting at the move. Today, employee unions at NLC threatened an indefinite strike against the decision.
The department of disinvestment (DoD) had proposed sale of 78 million shares, or five per cent of the total, through Offer for Sale.
Shares of NLC rose 0.6 per cent to close at Rs 58.05 today. At the current market price, the stake sale could fetch Rs 452.8 crore.
The CCEA had earlier this month deferred a decision on the stake sale, subsequent to Tamil Nadu Chief Minister J Jayalalithaa having written to the Prime Minister (last month), opposing disinvestment in the integrated mining-cum-power generating company. She had said divestment in the company would lead to labour unrest and disruption of power supply from Neyveli.
DoD had told the CCEA that stake divestment was the only way to make the company compliant with the minimum public shareholding norm. The Securities and Exchange Board of India had set a deadline of August 2013 for all listed central public sector units to have a minimum of 10 per cent public shareholding. The government currently holds 93.5 per cent stake in NLC.
Jayalalithaa had suggested delisting of Neyveli Lignite or amending the Securities Contracts (Regulation) Rules, 1957, to make a special exemption for the company from the minimum public shareholding rule.
Foodgrain sale
The CCEA also cleared a proposal to sell 10.5 million tonnes of foodgrain, largely wheat, at a slightly subsidised rate. The aim is to control retail prices and clear storage space and the move would entail a subsidy of about Rs 5,500 crore.
"The Cabinet Committee on Economic Affairs (CCEA) has approved allocation of 10 mt of wheat and 0.5 mt of rice from Food Corporation of India godowns for sale under the Open Market Sale Scheme (OMSS)," Food Minister K V Thomas said after the meeting of the panel.
The total subsidy for 10.5 mt of grain would be Rs 5,491 crore, as prices under OMSS are lower than the cost of acquisition, officials said.
Briefing the media, Finance Minister P Chidambaram said: "We have a comfortable stock position of wheat." The sale would help vacate storage space for the new crop, he said.
The government has procured 25.1 mt of wheat so far. Of 10 mt to be offloaded through OMSS, the FCI would sell 8.5 mt from Punjab and Haryana to bulk consumers at Rs 1,500 a quintal.
About 1 mt is to be offered from FCI centres across the country to small traders at Rs 1500/qtl, plus freight. About 400,000 tonnes would be allocated to states for distribution to retail consumers and another 100,000 tonnes to cooperatives at Rs 1,500/qtl plus freight.
Thomas said the CCEA approved allocation of about 500,000 tonnes of rice to states for retail consumers at Rs 1,875 a qtl, plus freight.