Government approves premium rescheduling for highway projects

The government on Tuesday approved a proposal for postponement of premium payments by highway developers and has referred the matter to a panel for fine-tuning, an official said.     

“The Union Cabinet has cleared our proposal seeking rescheduling of premium but at the same time has referred the matter to a committee for further tune ups as regards to projects,” said a highways ministry official. The move could benefit players like GMR, GVK and Ashoka Buildcon whose projects were facing delays on account of high premium.     

Premium is a payment made by the developer to the National Highway Authority of India in build, operate and transfer projects. The premium, which is offered by companies during the bidding stage, is based on projected returns from tolls.     

The committee is likely to fine-tune the proposal soon, the official said, adding that the ministry was awaiting for minutes of the meeting for further information on the decision. A source said projects will be considered on a case to case basis for restructuring of premiums.     

The ministry has sent a proposal to the cabinet seeking its nod for rescheduling of premiums of about Rs 1 lakh crore in case of 23 awarded Build–operate–transfer (Toll) projects which have not yet achieved appointed date. However, the highway builders’ apex body National Highways Builders Federation (NHBF) has sought Prime Minister Manmohan Singh's intervention in ensuring level-playing field for all road projects on premium saying any restructuring of the premium should be made applicable to all such schemes instead of a selected few.     

“This policy amendment will be unfair to the developers of those premium BOT (Toll) projects who, despite severe financial hardships and delay in fulfilment of authority's conditions precedents, have taken the appointed date and are implementing the projects,” NHBF has said in a letter to the Prime Minister last week.

Cautioning that selective approach in allowing rescheduling of premium will invite litigation, the NHBF has said that any policy amendment needs to be extended to all premium projects awarded, irrespective of whether these have been issued appointed date or started construction. “The list of 23 projects identified as stressed projects and recommended for rescheduling of premiums are identified without any specific parameters...Two of the projects are already terminated projects, unjustified as stressed - Kota- Jhalawar and Coimbatore-Mettupalayalam,” it has said.     

Seeking equal parameters for all projects, it has said 13 of the identified schemes pertain to two to four laning where the toll/Premium payment starts after the construction phase and completion, whereas in four to six lane projects the toll/Premium payments starts immediately after the appointed date.