NHAI disappointed with Rangarajan panel report

Officials say report would not revive investments in sector

The National Highways Authority of India (NHAI) has been left disappointed by a report submitted by a committee headed by C.Rangarajan on rescheduling premium for road projects, as they did not consider any suggestions given by the authority.

Senior officials at NHAI said the report, if approved by the finance ministry, would not help revive investments in the sector and would extend benefits only to a section of highway developers in the country.

NHAI might now take up the issue with the roads minister, who would have to approve the report before it is sent to the finance ministry.

The Rangarajan Committee, which started working on the report nearly three months ago, had held discussions with the roads ministry, NHAI and the Planning Commission, to decide on the terms and conditions of rescheduling premium that companies have to pay the authority. Premium is the amount that developers owe the NHAI while being awarded a contract and is usually calculated on the basis of future flow of traffic. Highway developers were seeking rescheduling of premium worth Rs 1,51,000 crore spread across 20-25 years.

“We held discussions on this topic for a very long time and now we are left completely disappointed. We had asked for no penalty and the deferring of premium by making companies pay only 25 per cent of the actual amount due during the first three years. But they have not taken any of our recommendations into consideration,” a senior official at NHAI said.   

Key recommendations by the committee include allowing companies to reschedule their premium only when toll collected is not enough to meet the project expenses such as servicing of debt, operation and maintenance expenses and payment of quoted premium to NHAI. Under this clause, if the toll revenue collected by the highway developer falls short of the amount that the concessionaire needs to spend on operation and maintenance and debt servicing in each accounting year, this can be extended as a loan by the government at an interest rate equal to two percentage points above the bank rate, officials at NHAI said.

NHAI and the roads ministry had recommended allowing private road developers to pay only 25 per cent of the premium they owed NHAI in the first three years. Companies were to raise this to half the amount due after three years. The sum carried forward was to attract an interest rate of 10.75 per cent.

“The trouble started after the Planning Commission opposed the plan. We are completely disappointed,” the official added. A senior official in the roads ministry had earlier said that the companies needed to be given a breather since they would have to go for re-bids otherwise.

The Rangarajan Committee was set up after a number of road developers threatened to walk out of projects due to the economy's slowing. They've complained about inability to generate adequate revenue for repaying the premium. The committee has also said that the companies should not be allowed to pay dividend to their parent companies until they cleared their dues to NHAI.

The government has already cancelled a plan to award projects on public-private partnerships during this financial year and is moving towards government-funded projects. The roads ministry plans to now award 5,000 kilometres this year under the engineering-procurement and construction mode this year, after the developers decided to stay away from bidding.