Continuing with its big-bang reforms, the Cabinet recently announced a slew of steps to breathe life into the battered road sector and revive 34 stalled projects. In an interview to Bloomberg TV India, National Highway Authority of India (NHAI) Chairman Raghav Chandra says the Cabinet decisions are a significant milestone and will go a long way in reviving the sector.

What do the Cabinet decisions mean for the road sector?

The decision of the Cabinet to allow an extension of the concession period in the case of languishing BOT projects is a significant milestone.

It will make a dramatic and favourable impression and allow us to resuscitate and consider the revival of several languishing projects. Overall there are about 40 such projects that one can think of, to which this sort of a treatment will be amenable. The projects will benefit from this overture of the government to revive the PPP sector and the highways sphere and in particular to help us to bring back on stream these BOT projects that have been languishing.

The government has now authorised the NHAI to pay rationalised compensation to the developers in case of delays not attributable to them. How will you arrive at this compensation annuity?

In the case of BOT toll projects, what this will mean is that the concession period will increase depending on NHAI’s assessment through the independent engineer. The engineer will give inputs about the nature of the default on the part of the authority, which is the NHAI, in providing and handing over the land and clearances in time, and also the concessionaires default, if any, in obtaining or undertaking the condition precedent.

Once that is adjusted the concession period will be increased, but not the tolling period. This will have various benefits for the concessionaire because firstly his period of tolling, which was earlier evaporating, will get restored. So he will be able to collect tolls for that period.

There is also the larger fact that it will add to the comfort of the financial institution and banks, who will no longer treat it as a stressed project and hopefully will be able to look at the project as a non-stressed asset and look upon it favourably to continue and ensure that the full amount and scope of the lending that was initially envisaged is meted out to the concessionaire.

And banks will be amenable to look at the restructuring and refinancing models that they and the concessionaire may come up with. In the case of annuity projects, sometimes what used to happen was when a project languished, the annuities, which are six monthly fixed payment streams given over to share the risk, were lost because the work was not completed. But now, because the concession period will get extended, those annuities will be restored. The point that is being made is that the annuities will be restored even up to the specific days that have been lost because of conditions precedent not having being fulfilled. So this I think is a very comprehensive treatment of the subject.

This, along with the earlier provision for equity infusion for which we hoped to be able to resolve some glitches, should help to revive the sector, to restore the credibility of the PPP model of the future and also to reduce litigation, which has so far encircled and enshrouded this sector.

With respect to projects for special dispensation, is there any specific time line that they will have to abide by for the completion of the project as well?

Yes, there is a specific timeline — these projects will have to be completed in three years. I think these languishing projects should be able to rise up to the occasion. Now it is really a challenge for the concessionaires. The government has done enough and now they (concessionaires) have to pick up the challenges, show their managerial competence and fulfil the mandate given to them by the government and the NHAI.

What’s NHAI’s target for this fiscal and how much have you achieved so far?

NHAI intends to award projects of 5,000 km stretch this fiscal. We have already done about 2,600 km of awards. We are hopeful to meet the target that has been set and go beyond that.

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