Domestic financial institutions are seeking a backstop facility as a prerequisite for providing financing to road projects.
The institutions want the government or a government-appointed agency to provide a backstop facility to meet revenue shortfalls as it will minimise the possibility of a default in repayments.
The government, on the basis of a traffic survey, has decided to levy fixed toll rates on various types of vehicles using the roads. However, institutions are insisting on a back up arrangement in case the government's calculations on tariffs and traffic flows go awry. The institutions want the government or the appointed agency to meet shortfalls in revenue collection every six months. The institutions also want the land adjoining the roads to be developed to generate additional revenue and are insisting on concessional agreements for developing these peripheral areas, sources told Business Standard. Petrol pumps, hotels, and other similar facilities should be set up to generate additional revenues, the sources added.
The roads sector is one of the key infrastructure area that the government is keen to develop through private participation. Investments in the roads sector will give a boost to industry, especially the transport sector. It will also provide a fillip to the crucial steel and cement sectors, which are currently languishing. The high-powered committee, set up by the government under the surface transport ministry, recently cleared a package for private sector participation in highway and road projects. All outstanding commercial and legal issues as well as inter-ministerial differences have been resolved.
The committee has pegged the compensation rate for premature termination of project contract at 175 per cent of equity if the termination is due to a political cause and at 125 per cent if it is due to a non-political cause.
The other decisions taken by the panel include:
* conversion of four-laning projects into six-laning to be allowed after repayment of debt
* Canada-based N D Lea appointed technical consultant for four-laning projects
* outstanding debt clause redefined to include subordinate debt
* debt repayments to be made net of admitted insurance claims.
