Toll collection period in contracts to be extended to compensate operators

India Ratings and Research says the lockdowns would hit infrastructure construction and revenue growth of the implementing companies

highway — The clause, said a National Highways Authority of India official, had been invoked for all such projects, as is allowed in the contracts signed with contractors.

2 min read Last Updated : Mar 29 2020 | 12:32 AM IST

With toll collection on national highways suspended across the country amid the Covid-19 crisis, the operators will be compensated through extension of their collection period by the same number of days for which the non-tolling is in force.

The government has also invoked the “force majeure” clause — the term for an unforeseeable circumstance or incident that prevents someone from fulfilling a contract. It is included in contracts to remove liability for natural and unavoidable catastrophes that interrupt the expected course of events and restrict participants from fulfilling obligations.

The clause, said a National Highways Authority of India official, had been invoked for all such projects, as is allowed in the contracts signed with contractors. So is extension of tolling periods after it is suspended. In the wake of the massive demonetisation exercise in late 2016, highway tolling had been suspended for weeks. And, the companies’ toll collection period was extended by that many days.

India Ratings and Research says the massive lockdowns to contain the Covid-19 outbreak would hit infrastructure construction and revenue growth of the implementing companies. Add the fact that many of their workers are returning to their homes in interior parts and are likely to return only after the situation normalises, which could be a month from now or even later. Combined with the fact of continued expenditure in the form of overheads and finance charges and there's a clear hit on profitability.

“At this point, nothing is moving from Point A to Point B. Things have come to a standstill and it will take at least three to four months for the work to even begin,” says Jayant D Mhaiskar, chairman of MEP Infra.

Even if lockdown is lifted, workers would not be available and there will be restrictions at construction sites, he noted.