Govt to introduce relief package for highway companies
National Highways Authority of India (NHAI) is seeking to push a relief package for road developers as many are under stress and are finding it tough to raise debt and equity to finance projects they had bagged by offering to pay a premium.
Now the agency is looking to get approval for a staggered payment which will allow developers to pay a lower upfront premium this year and instead postpone a part of the amount during the latter part of the contract period to make the projects viable.
The Prime Minister’s Office (PMO) is to consider ways to revitalize the highway sector due to its recent poor show in the wake of the changed economic scenario. So far this year, NHAI has awarded contracts to build under 1,000 km of highways compared to the revised target of 4,800 km. Originally, PMO had set a target of 9,500 km, twice the revised level. The bailout is being discussed as large players such as GMR and GVK walked out of projects.
These were the developers who were quoted hefty premium and were assured about the annual upfront payment to government that increases 5% every year during the contract period that can extend up to 30 years.
According to sources, GMR had quoted Rs 636 crore as the annual premium for Kishangarh-Udaipur-Ahmedabad highway. Another example is re-bidding for six-laning of Barwa Adda-Panagarh highway in West Bengal. Where IL&FS had quoted highest premium of Rs 42 crore for this 123 km project while DSC had bagged the project last year quoting Rs 106 crore premium, although the contract was declined after DSC failed to achieve financial closure.
Even few other issues also came up like allowing 100% dilution of equity of developers in projects which have already been completed and tolling has started. In all the cases, NHAI has had completed projects and tolling has started as it held several rounds of talks with the highway developers with proper planning and clearance from authority.
This may infuse the equity into the sector, allowing developers to get funds to start the projects, although they had faced resistance from the Planning Commission and the expenditure department.
Click here for related forum discussion
Related Real Estate News:
NHAI to build the longest highways until 2013
Legal action to be taken against GMR by NHAI
awarding projects, Bangalore-based group, Delhi, Delhi NCR, GMR Group, GMR Infrastructure, Legal Action, National Highways Authority of India (NHAI), New Delhi, NH construction, NH Development Programme, NHAI, NHAI official
[...] Govt to introduce relief package for highway companies googletag.cmd.push(function() { googletag.display('div-gpt-ad-1349265301547-19'); }); Tags: [...]