Road builders may have to pay fine to exit projects

Don't want to miss the best from Business Standard?

Road developers will not be blamed for delays in regulatory procedure but have to take responsibility for their own faults and may have to pay up to one per cent of total project cost as penalty for exiting, Road Minister Oscar Fernandes said. “If there is any fault on the part of the concessionaire, then there will be a penalty of a maximum of one per cent, of the total project for the developer to exit the project,” he said.

The government is also of the view that the developer will not be held responsible if there is any kind of delay in regulatory procedure. “If there is delay in land acquisition or environment and forest clearance, the concessionaire will not be held responsible.In that case they will not be penalised,” Fernandes said. The Ministry of Road Transport and Highways is believed to have firmed up this clause after consultation with the law ministry.

Last month, the government approved the proposal to facilitate harmonious exit of the concessionaire in ongoing and completed National Highway Projects, a move aimed at expediting implementation of road infrastructure in the country. This was also done to insulate the National Highway Authority (NHAI) from heavy financial claims and unnecessary disputes. The existing concessionaires both in case of completed and on-going projects have been permitted to divest their equity in totality. The decision was triggered by lack of interest among bidders for highway projects under the PPP (public private partnership) mode and difficulties faced in achieving financial closure for such projects.

A large number of highways projects, including 20 major projects involving investment of Rs 27,000 crore, are stalled for various clearances. Earlier this year, infrastructure players like GMR and GVK had recently walked out of mega road contracts while a large number of projects awarded during 2011-12 are yet to achieve financial closure.

The highway developers were facing acute shortage of equity and were unable to raise the required debt which in turn resulted in poor response to the PPP projects. Meanwhile, the newly-appointed road minister also said that his challenge will be to work towards getting speedy environment clearances for the projects which are at present stuck.