Rescheduling of premium amount for the NHAI projects bring smile to the BOT builders
The NaMo government is determined to give a boost to the infrastructure in the country and is taking all the measures to achieve it. Rescheduling the premium that the developers of the road projects have to pay to the government for securing the right to build and operate by the National Highways Authority of India (NHAI) is one such move which is expected to facilitate faster completion of the bottlenecked projects and help the companies to service the debt associated with them.
Premium is the amount the developers have to pay to NHAI for bagging road projects on a build-operate-transfer (BOT) basis. Based on the future traffic estimates, the developers have to bid the premium amount that they pay to NHAI upfront. The term for payment of the premium is typically 20-25 years, with a 5 % increase annually. Now the developers have to face a lot of issues while paying the premium money to NHAI in those projects where the toll collected on flyovers/ express highways etc. is insufficient.
Then the builders who had taken the project on BOT basis find it difficult to meet the project expenses such as servicing of debt, operations and maintenance, along with the premium payment. In March, a committee headed by then chairman of the Prime Minister’s Economic Advisory Council C Rangarajan had suggested a mechanism whereby the rescheduling of payment of such premium will be allowed only for those projects where the toll collected is insufficient.
In the current scenario companies like IRB Infrastructure, Sadbhav Engineering and Reliance Infrastructure (R-Infra) will benefit from this move that have a total debt obligation of Rs 4,500 crore associated with the road projects they are developing. These are eligible for rescheduled premium payment. R-Infra’s Rs 925-crore Hosur-Krishnagiri road project has been approved on premium restructuring. IRB’s Rs 2,226-crore Ahmedabad-Vadodara project and Rs 839-crore Tumkur-Chitradurga projects are among the beneficiaries of the scheme.
The NHAI allowed nine road projects to reschedule premiums in the last week of May, leading to a total premium deferment of Rs 5,960 crore. For FY15, the amount of deferred premium stands at Rs 652 crore. The developers have taken a sigh of relief and have welcomed this directive from the government.
Source- The Financial Express
Build-Operate-Transfer, Build-Operate-Transfer basis, NaMo government, National Highways Authority of India (NHAI), NHAI projects, status of NHAI projects
