Highway Ministry to speed up proposal to reschedule premium

Mamuni Das Updated - March 12, 2018 at 06:36 PM.

Will ask Ministerial panel to take call

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Facing a situation that may jeopardise the fate of many road development projects awarded two-three years ago, the Highway Ministry has decided to speed up its proposal to allow premium rescheduling.

The proposal will then be referred to an inter-Ministerial group headed by the Cabinet Secretary.

The Law Ministry has taken a stance against a proposal to permit deferment of premium payment for highway developers. The Highway Ministry had sought legal vetting of the proposal.

The Highway Ministry and National Highways Authority of India (NHAI) have favoured implementation of the proposal. “We will ask a Committee of Secretaries (CoS) to take a call on the issue,” said a source.

Road ahead

The future of some 26 road projects – where developers offered a premium of Rs 96,000 crore to the Government over the pre-defined concession period of 20-30 years – now hangs in balance.

Premium is the amount offered by a developer to the Government for bagging the right to invest in widening existing highways and collect toll from users over 20-30 years.

Less revenue

The premium is payable annually and goes up by 5 per cent every year.

Many developers have expressed their inability to implement projects as the actual toll revenues end up being lower since the Indian economy entered a slowdown phase, leading to project cost escalation. They have approached NHAI and have sought staggered premium payment over the project life period.

The developers want to pay a lower amount in the initial years and higher amount in later years, while keeping the net present value constant.

Fund crunch

Also, developers of about 30 projects awarded till early 2012 have not been able to tie up funds from banks and achieve financial closure.

Bank lending also got squeezed after developers directed banks to stop lending for road projects till 100 per cent land was available.

All these road projects were awarded on public-private partnership (PPP) basis, as the Government wanted to increase spending in sectors such as health and education.

However, as the economy slowed down, with the growth rate touching 5 per cent in 2012-13, investors stopped bidding for highway development.

In 2011-12, about 7,500 km of road development projects were awarded. In contrast, less than a 1,500 km of highways were awarded in 2012-13, with no response from bidders for several projects.

>mamuni.das@thehindu.co.in

Published on May 22, 2013 15:46