In a move that will go a long way in reviving the languishing national highway projects in the country, the Union Cabinet on Wednesday approved a one-time infusion of about Rs6,000 crore into such projects.
The decision will benefit at least 16 road developers whose projects are at an advanced stage of completion but are stuck due to either lack of additional equity or the lender's inability to disburse further funds. Due to the paucity of funds, road developers have been shying away from undertaking projects.
“The highways sector is at present struggling to roll out stuck projects worth Rs3.8 lakh crore, which include 16 big ticket projects. This fund roll-out would breathe life into the 16 projects involving over Rs15,000 crore in investments,” said an official from the Ministry of Road Transport and Highways.
“The Government will give one time fund of about Rs6,000 crore to complete works that are half-finished. This move will also give extra concession period for lenders to recover their investment where project completion has got delayed by one to three years due to National Highways Authority of India’s fault,” he said.
The NHAI will provide funds from within its overall budget on a loan basis at a pre-determined rate of return.
"Of the ongoing 240 PPP Projects, some are languishing due to delays on account of land acquisition, grant of statutory clearances, local issues and shortage of construction materials etc. This special intervention is for those projects that are in the advanced stage of completion but are stuck due to either lack of additional equity or lender's inability to disburse further," said the official.
"The 16 major NH projects which will benefit from this scheme entail investments of about Rs 15,000 crore. The list include seven projects in West Bengal, six in Kerala, two in Goa and one in Tamil Nadu," he said.
Under this scheme, the one-time fund infusion is subject to the condition that the developer will pay back the loan after completion of the project. "The loans are to be recovered along with interest at bank rate plus 2 per cent by NHAI from annuities payable, bi-annually, through execution of tripartite agreement among the senior lender, concessionaire and the authority," said an official release from the Cabinet.
"These 16 projects are those where bankers have stopped lending or are wary because projects have got delayed and hence toll collection will start late. This will impact their recovery from toll revenue since the total concession period does not get extended. We might also need to extend the concession period where the delay is because of the fault of the NHAI," said an official.
"Since the banks are now staring at losing their investment, they are not interested in funding new projects. At the very outset, they should have been careful while doling out loans but since they did not do their due research, they are now stretched," said the official.
The Ministry's move for "foreclosure" of contracts where projects get delayed due to the Government's failure to provide land in time will help in infusing new life into the current projects.
Only last week, Road Transport and Highways Secretary Vijay Chhibber also blamed the banks for "happily over-financing" road projects without doing the necessary due-diligence. He said that there are nearly 70 projects that have got funding at escalated costs.
Chhibber had said the problem compounded as banks gave large upfront amount to developers who used the money in other sectors without worrying about delays in the road projects.
After the steel sector, roads account for the second largest amount of bad loans for the banking sector.