 "Exit conditions for road constructing developers should be eased: Survey")
Exit conditions for project developers constructing highways should be eased as some of them are facing difficulty in raising loans for road building, the pre-Budget survey has suggested.
"Of late, financing of road projects has also run into difficulty as leveraged companies implementing road projects are unable to raise more debt in the absence of fresh equity," the Economic Survey 2013-14 said, adding that in the current market conditions these firms are unable to raise new equity.
"Exit conditions, therefore, need to be eased in such a manner that promoters can sell equity positions after construction, passing on all benefits and responsibilities to entities that step in to take over the project," it added.
Further, the survey suggested that the toll should have correlation with users' capacity to pay as well as reasonable payback for the financing entities.
From the lending institutions' perspective, keeping in view of the asset-liability mismatch issue, there is a need to design new financing products to avoid undue burden on the developer.
International practices like 'traffic trigger' and 're-equilibrium discount' could be examined to see whether they can be applied to address some of the problems of the Indian road sector.
A 'traffic trigger' clause in the contract implies that if a certain volume of identified traffic is reached, the concessionaire is obligated to increase roadways capacity in order to maintain a minimum level of service to users.
The 're-equilibrium discount' is used to reduce tariff when performance parameters are not being met. A table of discounts is pre-defined in the contract. The discounts represent the resources that are not invested as a result of a failure to meet performance parameters.
India has one of the largest road networks in the world, spread over 48.65 lakh km. It comprises national highways, expressways, state highways, major district roads, other district roads, and village roads.
National Highways comprise 92,851 km of the total length of roads in the country.
"While in 2012-13, a total of 1,116 km worth of projects were awarded, 17 projects for a length of 1,436 km with a total project cost of Rs 7,256 crore have been awarded in 2013-14," the survey said.
Meanwhile, NHAI has decided not to award projects till all pre-construction are in place to avoid post bid delays and litigations.
NHAI has also assured that for the existing and future projects the process of obtaining environment and forest clearances has been relaxed considerably.
The authority has allowed complete exit to equity investors for all concessions post completion of projects. This move has helped unlock growth capital for utilisation in future projects and infuse fresh capital into the sector.
"Of late, financing of road projects has also run into difficulty as leveraged companies implementing road projects are unable to raise more debt in the absence of fresh equity," the Economic Survey 2013-14 said, adding that in the current market conditions these firms are unable to raise new equity.
"Exit conditions, therefore, need to be eased in such a manner that promoters can sell equity positions after construction, passing on all benefits and responsibilities to entities that step in to take over the project," it added.
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Promoters can then use the equity thus released for new projects.
Further, the survey suggested that the toll should have correlation with users' capacity to pay as well as reasonable payback for the financing entities.
From the lending institutions' perspective, keeping in view of the asset-liability mismatch issue, there is a need to design new financing products to avoid undue burden on the developer.
International practices like 'traffic trigger' and 're-equilibrium discount' could be examined to see whether they can be applied to address some of the problems of the Indian road sector.
A 'traffic trigger' clause in the contract implies that if a certain volume of identified traffic is reached, the concessionaire is obligated to increase roadways capacity in order to maintain a minimum level of service to users.
The 're-equilibrium discount' is used to reduce tariff when performance parameters are not being met. A table of discounts is pre-defined in the contract. The discounts represent the resources that are not invested as a result of a failure to meet performance parameters.
India has one of the largest road networks in the world, spread over 48.65 lakh km. It comprises national highways, expressways, state highways, major district roads, other district roads, and village roads.
National Highways comprise 92,851 km of the total length of roads in the country.
"While in 2012-13, a total of 1,116 km worth of projects were awarded, 17 projects for a length of 1,436 km with a total project cost of Rs 7,256 crore have been awarded in 2013-14," the survey said.
Meanwhile, NHAI has decided not to award projects till all pre-construction are in place to avoid post bid delays and litigations.
NHAI has also assured that for the existing and future projects the process of obtaining environment and forest clearances has been relaxed considerably.
The authority has allowed complete exit to equity investors for all concessions post completion of projects. This move has helped unlock growth capital for utilisation in future projects and infuse fresh capital into the sector.