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The Finance Ministry has raised fresh objections to the proposal to allow rescheduling of the premium highway developers have to pay the Government.
Developers had originally offered to pay high premiums to the Government in order to bag highway development projects. However, they say that lower-than-expected economic growth and a number of bureaucratic and other hurdles, which have led to delays, have meant their estimates of toll collections have been well below expectations.
The Finance Ministry, however, is not willing to let go of the revenue that should have accrued in the short run, and wants a case-by-case analysis of each highway project which wants its payments restructured.
“We are not saying that the Road Ministry should approach the Cabinet separately for each of the projects, but there should be a detailed fact file for each of the projects in one note,” a Finance Ministry official told Business Line , while reiterating that there has to an element of penalty included in the final outcome.
The move comes in the backdrop of highway developers writing to the Prime Minister, the Finance Minister, and Highways Minister on October 1, objecting to the list of projects being considered for rescheduling and seeking a wider list to include many more developers.
The proposal moved by the Road Ministry was listed for discussion in the Cabinet’s meeting on October 3, but could not be taken up.
Any decision on the issue will impact many road projects, including major infrastructure players such as GMR, GVK and Ashoka Buildcon.
Premium is the amount offered by a highway developer to the National Highways Authority of India (NHAI) in exchange for the right to develop, maintain and collect tolls from a highway for 20-30 years. The premium amount, which is payable every year, is arrived at through a competitive bidding process.
Due to the slowdown, many highway developers who had won projects two-three years ago promising high premium, are now unable to implement the projects.
To continue the projects, they want their premium payments ‘back loaded’ in such a manner that the net present value of the premium (the total projected payments over the lifetime of the project at current prices) is unchanged, but the annual outgo is lowered during the initial years of the project.
Else, the NHAI faces the prospect of developers backing out of projects, or having to cancel and re-invite bids.
“One of the options of the proposal has clubbed 23 projects involving investment of nearly Rs 1 lakh crore for a one-time concession. We believe that there can’t be a uniform solution for all these projects, as not only the premium amount varies but, in some cases, is so small that it does not require rescheduling,” a senior Finance Ministry official said. The proposal contains options for relief to the developers, including a one-time concession to the developers.
The proposal also involves reworking the original contract terms. The Finance Ministry says the Government is willing to deviate from the contract, but developers also need to bear a part of the cost.
“There should be sacrifice from both sides. The developers should be ready to take a haircut in case of rescheduling,” the Finance Ministry official emphasised. The NHAI has called for stricter commitments from highway developers in the form of cuts in tolls.
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