In a move that will help in unlocking Rs4,500-crore worth of investments in infrastructure sector, the Centre on Wednesday allowed developers to exit road projects two years after they are completed. The Cabinet Committee on Economic Affairs (CCEA) gave a go-ahead to unlocking the funds to allow the much needed liquidity in the infrastructure sector.
“The locked-in equity, which is about Rs4,500 crore from 80 projects, can be re-invested to lay down 1,500 kms of new highways on PPP mode. This will help revive the private sector’s response to Build, Operate and Transfer (BOT) projects,” said an official from the Ministry of roads, transport and highways. “This decision will give a new push to at least 16 major road projects across the country, which are languishing for want of funds as there is a shortage of equity or the lender is unable to disburse further,” he said.
The CCEA authorised the National Highways Authority of India to intervene and expedite projects, which are suffering from fund shortage. The Cabinet also approved a comprehensive Exit Policy framework that permits concessionaires or developers to divest 100 per cent equity two years after completion of construction, it added. In the last few years, public-private partnership (PPP) projects have not been able to attract bids and one of main reasons behind this is the lack of availability of equity in the market among qualified bidders.
The Government decision will help harmonise conditions uniformly across all concessions signed prior to 2009 with the policy framework for post 2009 contracts which permit divestment of equity up to 100 per cent, two years after completion of construction. The BOT is an arrangement in which a private company builds an infrastructure project, operates it and then transfers the ownership to the Government. Generally, the Government becomes the company’s only customer and gives assurance to acquire a predetermined amount of the project’s output, thereby ensuring that the firm recoups its initial investment in a set time span.