29 November 2013
A
committee headed by C. Rangarajan, chairman of the Prime Minister’s
Economic Advisory Council, is likely to recommend the restructuring of a
portion of the premium commitment of a developer. Photo: Mint
New Delhi: The government is close to finalizing a
bailout package for road developers, according to a senior government
official who declined to be named.
A committee headed by C. Rangarajan,
chairman of the Prime Minister’s Economic Advisory Council, is likely
to recommend the restructuring of a portion of the premium commitment of
a developer and order traffic studies of projects to determine their
eligibility for availing of the relaxation under this policy.
For six-laning of highway projects, the Rangarajan
committee is likely to allow restructuring of 75% of the road
developer’s premium commitment for the first three years during
construction and 50% of the premium for the remaining years, said the
official.
The developers will be required to provide a bank
guarantee in lieu of the relaxation. “The restructuring would be spread
over three years short of the concession period,” the official said.
The panel is also likely to propose that annual cash flow
that is in surplus to the debt servicing and operation and maintenance
(O&M) obligations will be adjusted against the accumulated deficit
in premium payment obligations.
For four-laning of highway projects, the restructuring of
premium payments will begin after the completion of construction. The
developer will be required to pay 75% of the premium commitment for the
first three years after the completion of the project, and 50% for the
remaining years.
In order to determine the eligibility of road projects,
the committee has asked the National Highways Authority of India (NHAI)
to conduct a traffic study for the project to determine if the current
traffic trends help meet the revenue projected in the financial
statement. If the fresh traffic study establishes a shortfall in
projected revenue, the project will be considered “stressed” and
eligible for the relaxation.
“The issue of discount rate will be addressed though an
existing provision in the model concession agreement that allows the
developer to take loans from the government to meet shortfall in
premium. The discount rate could work out to 10.75% and an additional 2%
if bank guarantee is required,” the official said.
Promoters of 48 road projects have been in talks with NHAI for restructuring of premium payments.
The issue of levying a penalty has been dismissed.
The Rangarajan committee is expected to come out with the recommendations by the end of this month.
If accepted, NHAI will be empowered to decide which projects can avail premium restructuring.
The government had given an in-principle approval on 17
October to the proposal to restructure premium commitments of stressed
road developers with riders.
The road ministry, which awarded just 1,322km of road
projects in 2012-13 against a target of 9,500km, hopes to revive
activity in the sector. The sector has faced a slowdown because of the
overall economic downturn, cautious lending by banks and the highly
leveraged balance sheets of developers.
First Published: Fri, Nov 29 2013. 12 06 AM IST
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