Exit policies for the road developers to give relief to the lenders and developers
The government is making considerable changes in the exit policies for the road developers and is trying to safeguard the interest of the banks, financial institutions and other lenders. The government is actively considering allowing lenders to substitute developers even before the project’s commencement of commercial operations. This move was decided as there was a lukewarm response to the relaxed exit policy for road developers announced in June 2013.
This means, now no one has to wait for the project to be declared a non-performing asset (NPA) for the lender and the lender can substitute the builder or the stressed builder can exit at any stage of the development. The new window of 100 % exit will be open to all the projects, already awarded and the future ones. The existing policy is restricted to projects awarded after 2009 where commercial operations had begun.
In the present scenario, for the projects awarded before 2009, the developers can offload only up to a 74 % stake in the project. The remaining 26 % equity has to remain with the developer till the end of the concession period. As per the current policy, a lender has the right to change the developer only if the latter fails to fulfil the contract and debt-servicing obligations or does not meet the deadlines.
The ministry of road transport and highways wants to bring this move to help unlock funds and accelerate project implementation. M Murali the director general of National Highway Builders Federation welcomed the move and mentioned that many developers want to exit before the CoD (commercial operations date) is achieved but are unable to do so due to the present norms. The lenders also welcomed the substitution of the concessionaire before declaring a project as an NPA. The National Highways Authority of India (NHAI) has also supported the move.
Source- The Financial Express
Exit policies for the road developers, lenders and developers, Non-performing asset, non-performing assets (NPAs), npa non performing assets
