Some 5,100 km of BOT road projects are in limbo, according to a study by rating agency Crisil. These Build-Operate-Transfer projects account for more than half of all the ‘under-construction’ road projects.

These are toxic projects whose financials have turned awry due to aggressive bidding and cost overruns caused by delays in land acquisition.

The holding companies of these projects already have high levels of debt. “But the firms are not terminating them as they have spent some funds for construction of these projects,” explained Sudip Sural, Senior Director, Crisil, responding to a query from BusinessLine .

More than half of all under-construction BOT road projects — spanning 5,100 km and with a sanctioned debt of ₹45,900 crore — are at high risk of not being completed, said Crisil.

“The right of way is the primary reason for time and cost overruns and low overall progress of highway construction. Weak financials of sponsors and the inability to bring in equity as well as support for cost overruns are expected to aggravate matters,” the report stated.

The report points out that the cost overrun support required for the under-construction BOT projects is around ₹28,500 crore, of which ₹9,300 crore could be raised either by stake sale or by raising equity from the capital market. Another ₹6,700 crore is expected from operations and additional borrowings by the sponsors. That still leaves a shortfall of ₹12,500 crore.

Even operational projects are facing pressure as toll revenues are not enough. “Today, 26 operational highways spanning over 2,400 km and covering 40 per cent of the total length of operational BOT are unable to service debt amounting to ₹17,100 crore. Of these, 24 are struggling because of lower-than-estimated traffic,” Sural said.

To change this, their toll revenue will have to rise by a steep 37 per cent compared with a forecast of 10 per cent for the near term. This has to be largely driven by growth in traffic.

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