Banks to infuse more funds into stalled road projects

At least 7,500 km of highway projects are said to be stalled

The highways ministry has reached an understanding with banks on infusing funds equivalent to government equity infusion in select stalled projects.

State Bank of India (SBI) and YES Bank are among a host of banks that have agreed in principle to handhold some of the troubled projects.

THE NDA STRATEGY

Around 83 highway projects have been identified as stranded. Barring 15-16 projects, issues concerning the others have been resolved. Following are the key features of the process:

• Termination of contracts because of underperformance
• Rescheduling contract deadlines
• One-time funding by the govt
• Infusion of matching bank equity
• Harmonious substitution of operators

Union Transport Minister Nitin Gadkari has said all stranded highway projects will get off the ground by May 26. Over a dozen chronic projects were still stalled, a government official pointed out.

A questionnaire to the highways ministry for details of the stranded projects went unanswered but an official said banks had agreed to the funding plan. "SBI and YES Bank have been more forthcoming, which will help in reviving half-a-dozen projects. The paperwork is likely to be completed in the next 10 days," the official said.

Most state-owned banks and a few private ones like ICICI Bank and Axis Bank have exposure to highway projects. "Each project has been individually examined. After identifying where fund infusion can help, banks are conducting their due-diligence," the official added.

The Cabinet Committee on Economic Affairs had in October approved a one-time funding by the government to revive languishing projects. The National Highways Authority of India will recover the loan along with interest from the annuities payable through a tripartite agreement with the senior lender and concessionaire in such cases. This was applicable for projects languishing as on November 1, 2014. Besides roping in banks, the government has restructured the premium of certain projects. Contracts for another set of projects were terminated. The public works departments of state governments were asked to take over work in other cases, said the official.

According to an estimate of CRISIL Ratings, issues relating to 10 per cent of projects covering 5,100 km identified by it for being at risk last year, have been resolved. The debt exposure to the remaining projects is estimated at Rs 40,310 crore. These were projects under construction.

A CRISIL Ratings study in October said 7,500 km of build-operate-transfer highway projects were at risk. These included 5,100 km under construction and 2,400 km operational. "Under-construction projects require support of around Rs 28,500 crore over the next two years. Of this, about Rs 16,000 crore can be stumped up by sponsors. That leaves a significant shortfall of Rs 12,500 crore," said Sudip Sural, senior director, CRISIL Ratings. The chronic cases include the Delhi-Jaipur highway.

"The government is largely responsible for delays in this crucial highway project, which should have been completed by 2011. Barring three structures, 57 of the structures, including flyovers, will be completed by December, when we will inaugurate the project," Gadkari had said in October.

Work on the project started in 2008. Its completion has been a priority of both the current and previous governments. Besides land acquisition, there were contractual issues and the project cost of the 260 km highway shot up to Rs 3,000 crore from Rs 1,896 crore. Fourteen banks had financed the project that was being developed by Pink City Expressway.