India’s nodal road development agency has warned that almost Rs 98,000 crore of premium revenue from highway builders is in jeopardy after its proposal to reschedule the premium payments due from road developers was turned down by the Law Ministry.
Pushed to a corner after the Law Ministry’s ‘official level’ rejection, the National Highways Authority of India (NHAI) has asked for a rethink at the “highest level”.
The Law Ministry decision jeopardises nearly 25 highway projects awarded two-three years ago and has the potential of putting to risk nearly Rs 98,000 crore of premium that the Government would have received, NHAI has pointed out in a letter.
Mounting delays
Further, if these projects are called off and the developers debarred for failing to meet bid conditions, the entire public-private partnership model in the road sector could be “derailed,” the letter added.
Faced with mounting delays in PPP projects, the Highway Ministry has already taken a de facto decision to shift away from PPP model, by deciding to follow government-funded model for two-thirds of road development contracts to be issued this financial year.
“Rejection of our proposal to reschedule the premium has come as a big dampener to our efforts to revive the sector,” a disappointed NHAI Chairman R. P. Singh said in his letter, sent last week to Highways Minister C. P. Joshi. Earlier, such issues were raised with the Secretary to the Ministry.
“We are trying to salvage contracts that are in favour of the Government and it will be against public interest to terminate the contracts,” Singh said, calling for an “informed decision”.
Postpone payment
The NHAI proposal, supported by Highway Ministry, envisaged allowing many developers, including GMR and GVK, to postpone premium payment for projects that have now become unviable due to economic slowdown and delays in land acquisition and environment clearance.
To bag the right to invest in widening highways and collect toll from users over 20-30 years, many road developers had offered high annual premium payments to NHAI. Now, developers are unable to implement the projects on the back of increased project costs and low level of actual toll revenues. So, they have approached NHAI for rescheduling the committed premium by paying less in initial years and more in later years, while keeping the net present value constant.