Govt mulls one-time fund infusion into stalled road projects of IL&FS

The infrastructure construction and finance company is also grappling with arbitration claims worth around Rs 70 bn with the NHAI, which are under various stages of resolution

The government might go for one-time fund infusion into the languishing national highway projects of IL&FS, senior officials told Business Standard. They, however, declined to share the proposed fund infusion plan. 

The Ministry of Road Transport and Highways, they added, was not considering a takeover of the firm’s projects via the National Highways Authority of India. IL&FS could sell the completed road projects where tolling is underway independent of any government interference, the officials said. 

Some of the key stalled highway contracts of IL&FS are Barwa Adda-Panagarh (West Bengal), Patna-Gaya-Dobhi (Bihar), Amravati-Chikli (Maharashtra) and Fagne-Maharashtra/ Gujarat border, totalling about 69 billion. According to a government list, the first project stalled in 2013-14, Patna-Gaya-Dobhi in 2014-15, and the remaining two in 2015-16.

The infrastructure construction and finance company is also grappling with arbitration claims worth around Rs 70 billion with the NHAI, which are under various stages of resolution.

Road construction is undertaken by IL&FS mainly through special purpose vehicles floated by ITNL, which has 27 completed road projects, including national highways, city and state contracts. In its annual report for FY18, IL&FS noted that the introduction of the new Land Acquisition Act had prompted many owners whose lands were acquired under the earlier Act to seek additional compensation in line with the amended Act, leading to further unanticipated delays for some of its projects.

In order to get private sector investment back into road construction, the Cabinet in August 2016 approved a proposal under which government agencies would pay 75 per cent of the amount of the contract to clear the cases that were stuck due to contractual, land acquisition or other regulatory issues. The idea behind the move was to enable recovery of loans by banks and allowing construction companies to speed up execution of the ongoing projects. This, however, has not been of much help.