Exit route provided in BOT projects to boost infra activities

National highways authority of India to intervene to complete stalled projects

GN Bureau | May 13, 2015


#cabinet   #BOT   #build operate and transfer   #National Highways Authority of India  

With the government looking to award 10,000 km of highways in the current fiscal the cabinet on Wednesday approved 100 percent equity divestment after two years of construction completion for all BOT (build operate and transfer) projects.

In order to provide a renewed thrust to the highway sector and to bring the private sector back on board, the Cabinet Committee on Economic Affairs (CCEA), chaired by prime minister Narendra Modi, has approved two major policy initiatives aimed at improving the availability of equity in the market. The CCEA also authorized the National Highways Authority of India (NHAI) to intervene in languishing projects suffering from lack of funds. This will facilitate one time fund infusion to revive and complete languishing BOT Projects

The CCEA has approved a comprehensive Exit Policy framework that permits concessionaires/developers to divest 100 percent equity, two years after completion of construction.

This step has been taken bring in more parties into infrastructure building projects. During the last few years, PPP (public private participation) projects have not been able to attract bids due to lack of availability of equity with the qualified bidders.  The exit policy is a sort of incentive and it will unlock  equity from completed projects making capital potentially available for investment into new projects. This decision will also harmonise conditions uniformly across all concessions signed prior to 2009 with the policy framework for post 2009 contracts which permit divestment of equity upto 100 percent, two years after completion of construction.

AS per estimate there are 80 such BOT projects awarded prior to 2009 that have been completed and the locked in equity in these projects works out to approximately Rs. 4500 crore. Once this is unlocked and is re-invested in new projects this could support 1500 kms of new highways on PPP mode, thus help in reviving the response to BOT (T) projects.

Meanwhile, out of the ongoing 240 PPP Projects, some are languishing due to delays on account of land acquisition, grant of statutory clearances, local issues and shortage of construction materials etc.  In conjunction with several other measures being taken to revive such stalled projects, CCEA on Wednesday approved a special intervention for the projects that are in the advanced stage of completion but are stuck due to either lack of additional equity or lender’s inability to disburse further.

The NHAI has been authorized to provide funds to such projects from within its overall budget/corpus on a loan basis at a pre-determined rate of return. This loan is to be recovered along with interest as the first charge from the toll receipts immediately after completion of construction.

NHAI has been directed to develop a robust mechanism to determine eligibility of the project as also the extent of funds required to complete projects, in time-bound manner. It is expected that about 16 such projects languishing in various part of the country where public is facing difficulty on account of incomplete works will benefit from this decision. This will also add momentum to the overall growth of the highways sector in India which is already on the path of revival.

Comments

 

Other News

Surging oil prices worry India, says Pradhan in OPEC meet

Minister of petroleum and natural gas Dharmendra Pradhan has said the fragile world economic growth will be at threat if the crude oil prices continue to surge. He said surging oil prices are creating stress throughout the global economy and particularly to India.   He

KVIC gets Air India contract

Air India’s keenness to provide Khadi products to its flyers has helped the Khadi and Village Industries Commission (KVIC) bag an order of Rs 8 crore from the national carrier to supply Khadi amenity kits to its international passengers.  This is the third time that the KVIC has secured

“Blockchain allows individuals to monitor use of personal data”

Can you explain the concept of blockchain? How does it function? What kind of IT infrastructure is required for deploying it?  Blockchain is a system for maintaining distributed ledgers [‘distributed ledger technology’ or DLT] in a way that allows organisations whi

“Key milestones achieved in Assam”

In an interview with Governance Now, Anil Kumar Jha, special DGP, CID, Assam, who is also nodal officer for the CCTNS project, speaks of what the system in its present form has helped his state achieve. What is the current status of CCTNS in Assam and its outcome?

Crime tracking project: Bugged from the beginning

A stand-off between the ministry of home affairs (MHA) and software development firm Wipro seems to have long held up the Rs 2,000 crore crime and criminal tracking network and systems (CCTNS) project, conceptualised ten years ago. The project aims to digitise and connect all police stations in the country

Activists question displacement and dispossession of marginalised communities

Questioning the development model pushed ahead for profit oriented growth, social and political activists, academicians, financial analysts and civil society organisations are holding a three day confluence of Peoples’ Convention on Infrastructure Financing in Mumbai.     &nb

Current Issue

Current Issue

Video

CM Nitish’s convoy attacked in Buxar

Opinion

Facebook    Twitter    Google Plus    Linkedin    Subscribe Newsletter

Twitter