Slowdown, delays impact developers’ interest in PPP models
According to the experts, Liquidity constraints, approval delays and the economic slowdown have forced the developers not to take up large infrastructure and road projects on PPP basis.
An expert also mentioned that the government gives attention on developing infrastructure projects on public private partnership model to minimize its burden and to motivate private sector to participate in the development. Though, the current economic situation is impacting the developers who are not interested to take the risk attached with the PPP projects.
According to the India Rating, The National Highway Authority had pressed the government to award projects as cash contracts.
Associate Director (infra and project finance) of India Ratings, Mr. Chintan Lakhani mentioned that this situation is because of spiritless response of NHAI in awarding the projects through the PPP model.
The reducing developer’s interest in the PPP model is because of the reason that the NHAI awarded a paltry 123 km of its 2000 km PPP target as of last November.
The cash contract or the EPC model is appreciated by the developers as the duty of funding, getting approvals, among others lies on the government
Mr. Lakhani says that not many projects are awarded on BOT and the developers are ready to bid for EPC projects as the risk involvement in the latter model is less than in the earlier model. The risk of financing includes high interest rates, approvals, traffic under performance in case of road projects are some of the concerns raised by developers.
Mr. UPS Madan, MMRDA Commissioner, says that they did not get the desired response for the Trans-Harbour project from the developers and because of that they have now decided to go with the project on EPC basis.
Mr. Lakhani further added that if implemented, the cash contracts could help the developers to focus on the main business and improve their liquidity. This could help to increase the growth in infrastructure sector which have not been showing the interest under the PPP model.
Source: The Economic Times
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