The one-time fund infusion proposal by the Centre to revive languishing national highway projects may not be acceptable to the developers and lenders on the claim of the National Highway Authority (NHAI) on toll receivables, says a report.
India Ratings in its report said that lenders already with high exposure to these languishing projects may be unwilling to commit more resources without the help from external resources.
last week, the Cabinet Committee on Economic Affairs (CCEA) had approved a one-time fund infusion to revive and physically complete languishing national highway projects worth Rs45,000 crore across the country.
Under the structural subordination, the toll/annuity receivables of the project would be ensured for NHAI through execution of the tripartite agreements between the senior lender, concessionaire and the NHAI.
“Developers and lenders to the projects, however, may be hesitant for such a funding by the National Highway Authority, due to the clause of first charge by the authority on the toll or annuity receivables of these projects (structural subordination) over the senior lenders’ debt service,” India Ratings said in a report.
The report said that funding shortfall may not be the only reason for languishing projects, but also delays in getting the appropriate approvals and clearances from various Government agencies.
While the delays in forest and environmental clearances have resulted in project deferrals and cost overruns, the same has further increased the stressed loans in the banking system, it said.
“Therefore the one-time funding may not help all stranded projects, but only those that needed financing,” the report said.
It, however, said the successful implementation of recent measures by the government for bringing stalled projects back on track may give a fillip to the road sector, as this may push up average daily road construction, which has dropped to 4.1 kms in FY15 from an all-time high of 7.4 kms in FY13.
Bank credit to the infrastructure sector grew at a compound annual growth
rate of 39.5 per cent in the last 14 years.
Outstanding bank credit to the infrastructure sector stood at Rs10.07 trillion as of March, 2015 up from Rs95 billion in March, 2001.
After the steel sector, roads account for the second largest amount of bad loans for banks.