A long pending proposal from highway developers seeking a relaxation of the exit clause – which allows an investor with deeper pockets to replace a promoter facing financial stress – may finally move forward.
A committee comprising Union Finance Minister P. Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia and Highway Minister C.P. Joshi has agreed to a proposal to permit developers to fully exit any time after the financial closure for a project is achieved i.e. when a bank has given its funding commitment for a project. This will overrule the current time-based requirements that determine when a lead project developer can exit a project.
Earlier, the National Highways Authority of India (NHAI) had pointed out that banks should be allowed to replace a cash-strapped developer with a financially healthier substitute rather than declare the project a non-performing asset on its balance sheet.
This proposal had won the support of the Highway Ministry as well, which had felt that any developer unable to work on a highway development project should be allowed to exit as long as another firm is willing to take its place. The only condition fo this change will be that the replacement must meet the same technical qualifications.
To enable this change, the concession agreement between NHAI and developers will have to be altered, something which requires a Cabinet nod.
Meanwhile, another proposal to permit premium rescheduling is likely to be moved to a Committee of Secretaries. However, the final decision will be the Minister’s.
At present, Joshi is both the Railway and the Highways Minister. With a Cabinet reshuffle slated to be held soon, it is not yet clear which portfolio he will continue to hold.