Govt mulls compensation for highway developers

The government on Monday deliberated on providing compensation to road project developers for delays in obtaining environment clearances and land acquisition, besides providing early exits to highway developers.

The issues were discussed in a meeting between the Prime Minister's Office, the Ministry of Road Transport and Highways and the National Highways Authority of India.

“Many issues, including the compensation to concessionaires for delays in getting environment and other clearances, were discussed in the meeting,” said an official close to the developments.

“It (the compensation) would not be for a particular project but all road projects in general,” the official said, without divulging the nature of the compensation.

The government has been able to award only close to 1,500 km of road projects against a target of 9,600 km set by the PMO for 2012-13. The target was later revised downwards to 8,800 km. Also, the concessionaires were stressed due to unavailability of financing options that led to a few projects getting terminated due to delays in financial closures.

Recently, GMR Infrastructure Ltd terminated a Rs.7,700 crore road project citing delays arising from environmental and land clearances. GVK Power and Infrastructure Ltd also exited a Rs.3,300 crore road project citing similar reasons. However, NHAI had maintained that the exits were due to viability issues of the developers.

The meeting also contemplated allowing early exits to developers from the projects. NHAI is already in the process of formulating an exit policy that would enable concessionaires to make early exits from the projects.

The existing policy allows complete disinvestment after two years of commissioning of project, while they have to maintain 26 per cent equity in those two years. The one applicable to Build, Operate and Trasfer (BOT) projects awarded before 2009 requires the concessionaire to maintain 51 per cent equity throughout the time of construction, 33 per cent in the three years followed by the commissioning of project and then, at least 26 per cent in the rest of the concession period.

Companies with a big portfolio of highway projects are currently looking at selling them to monetise the value and move on to investment in new projects.

The meeting also discussed recognising the Total Project Cost (TPC) estimated by the concessionaire. At present, the NHAI estimated cost is recognised, which is backed by sovereign or government guarantee.

“It is likely that TPC estimated by a concessionaire will be considered,” the official said.

The road ministry is also of the view that there should be regulation in the sector which would speed up work on developing highways.

The Planning Commission has also suggested setting up an independent regulatory authority for the road sector for determining tariff and ensuring service quality.