Concession to put highways on track

Road construction companies to get benefits if delay is caused by govt

To revive highway construction in the country and boost investors' confidence in the sector, the government is planning to come out with a policy to extend the contract period if a delay has been caused to the project by the government.

The concession period for the project will be increased from what it was in the agreement signed with the government at the time of awarding the contract. The delays can include slow land acquisition, shifting of utilities, environment clearances, or issues related to railway over bridges and under bridges.

Some of the companies likely to benefit from the new policy are Gammon, Reliance Infrastructure, IL&FS and Larsen & Toubro.

Officials in the Ministry of Road Transport and Highways said the proposal has already been sent to the Union Cabinet for approval.

Across the country, 34 projects covering 3,687 km, with a total cost of Rs 38,080.50 crore, could benefit from the policy. According to an analysis of CRISIL, nearly half the road projects being constructed under the build, operate and transfer (BOT) model, with a sanctioned debt of Rs 45,900 crore, are at a high risk of not being completed.

"We have sent the proposal to the Cabinet to extend the period of concession of BOT projects which are facing a delay of two or more years. We have identified 34 delayed projects that would benefit under the proposed policy," said a senior National Highways Authority of India officer.

He added: "It will also facilitate greater economic activity because of increased connectivity across the length and breadth of the country, leading to enhanced economic activity."

Pon Radhakrishnan, the minister of state for road transport and highways, had earlier said some of the major reasons contributing to the delay in national highway projects are delay in land acquisition and statutory clearances, local law and order issues and shortage of construction material.

Recently, the government decided to give a one-time financial assistance to revive "physically incomplete and languishing" national highway projects awarded on the BOT (annuity) model. The three stalled projects, where 50 per cent of the construction had been completed till November 30, 2014, qualified for this. The government is likely to infuse Rs 878 crore in these projects to revive them.

In May this year, the government had taken an in-principle decision to bail out stalled BOT (toll) highway projects. Twelve such projects have been delayed. It is estimated that Rs 3,235 crore would be required to put them back on track.

The NHAI has identified 15 languishing road projects to which it will provide a one-time financial assistance for completion.
Comeback initiatives
The government has taken a number of initiatives this year to boost investor confidence and get the sector back on track

May: Full equity divestment after two years of completion for all BOT projects permitted
Before 2009, 80 such projects were completed. Equity locked in these is approximately Rs 4,500 crore

June: NHAI issues circular to provide one-time financial assistance to revive "physically incomplete and languishing" BOT (toll) national highway projects, in which 50% construction was completed till November 30, 2014
Twelve projects with estimated fund requirement of Rs 3,235 crore in this category

October: The scheme for BOT (toll) was extended to BOT (annuity) projects. The decision will benefit three BOT (annuity) projects