Mega bailout likely for road sector

Govt may reschedule Rs 1,51,000-cr payments; road ministry to ask Cabinet committee for concession to 16 more projects

The plan for a government bailout for highways looks set to swell to Rs 1,51,000 crore. The road transport and highways ministry might consider a National Highways Authority of India (NHAI) proposal to include 16 more projects for rescheduling of premium payments, if the Cabinet Committee on Economic Affairs (CCEA) decides to first provide a one-time relief for 23 others.

CCEA would soon consider a proposal to reschedule premium payment worth Rs 98,000 crore, to be paid by private concessionaires to NHAI for 23 projects. If 16 more are approved for reconsideration, another Rs 53,000 crore of premium payment due to be paid to NHAI would need to be rescheduled.

Larsen & Toubro, IDFC, Ashoka Buildcon and Oriental Structural Engineers were among the 16 firms hoping to be considered for premium rescheduling, said an official. NHAI has been holding meetings with officials in the ministry to take up the case of these 16 projects, too.

FAST LANE AHEAD

• 23: Number of projects NHAI board had earlier approved for premium rescheduling; the roads ministry had forwarded the request to the finance ministry
• Approval: The matter is now awaiting clearance from the Cabinet Committee on Economic Affairs
• Rs 98,000 crore: Total premium to be rescheduled
• 16: Number of projects NHAI now wants to be included in the scheme
• Rs 53,000 crore: Additional Premium payment for rescheduling
• Breather: Rescheduling not to affect the total payout, seen as only a breather for the industry

"We can look at providing relief to the projects if CCEA agrees to reschedule premium in the first place. This is a one-time relief and not a policy, so we are hoping they agree," a senior ministry official told Business Standard.

According to the norms, once a project is awarded to a concessionaire, it has to complete land acquisition and take clearances from the environment & forests ministry. The developer has to tie up funds, beside meeting other norms. Once the latter are achieved, an appointed date for start of construction is said to have been achieved. The issue regarding these 16 has emerged after the developers achieved their appointed dates.

"The finance ministry has recommended that we conduct a stress test to find who are in real trouble and have a valid point. With regard to the 16 projects, we feel they need some help and we will see what we can do from our side," the official added.

Premium is the amount a concessionaire pays NHAI for a BoT (build-operate-transfer) project, as it feels the returns are expected to be very high. This is usually decided on the basis of future traffic flow at the time of bidding.

The ministry is considering a rescheduling of the premiums to give a breather to companies for a few years, given the current slowdown in the economy. According to the plan, concessionaires are expected to pay less premium for a few years and then raise the amount, without affecting the total payment.

"Basically, it's a breather, so that we can kick-start the projects. Once traffic picks up, they can pay back a higher amount in the future. At this point, we need these measures to encourage private-sector investments," an NHAI official said.

At its board meeting, NHAI had proposed 23 projects be considered for premium rescheduling and sent a request for this to the road transport ministry. Following concerns raised by the other project concessionaires, NHAI requested that the remaining companies also be added to the list.

The move to restructure premiums was proposed against the backdrop of some private infrastructure firms pulling out of road projects due to delays in regulatory clearances, such as land acquisition and environment approvals.

"Except a few cases, there is actually no need for premium restructuring. The government has taken a number of steps to ensure the private sector is not affected and it's the companies that are at fault, as they anticipated the economy would continue to grow at the same pace. There are some genuine cases where, for reasons such as a ban on mining, the traffic flow has fallen. Otherwise, there is no genuine reason for all companies to seek rescheduling," another ministry official said.