Norms for highway projects pact changed

The threshold limit in the conflict of interest clause in the model concession agreement (MCA) for highway projects has been increased from 5 per cent to 25 per cent, which was recommended by the B K Chaturvedi Committee, set up to find ways to expedite various road projects in the country.

This will allow any two special purpose vehicles (SPVs) with a common partner having up to 25 per cent stake for bidding for the same project.

Earlier, any two SPVs in which any developer had more than 5 per cent shareholding each were barred from bidding for the same project. It was increased to 5 per cent in July this year from the earlier 1 per cent.

Among other recommendations which have been accepted are the introduction of an ‘exit clause’, removal of termination clause, no forfeiting of security money deposited by the bidders if they are not present at the time of bid opening, and constituting an empowered group of ministers to clear stalled projects.

The exit clause allows the lead partner in an SPV to exit by selling its stake after the construction of the project is over. Earlier, it was mandated to stay till the completion of the concession period (ranging from 20 to 30 years).

The ‘termination clause’ allows NHAI to take back tolling rights from a concessionaire anytime before the concession period is over, if the concessionaire has recovered its investment on the project.

However, the Cabinet Committee on Infrastructure (CCI) has sent back the recommendations on finances to the Planning Commission.

“The CCI did not accept the committee recommendations on the financing side. All such recommendations have been sent back to the Planning Commission,” said a source in the ministry, who did not wish to be named.

The committee’s recommendation on financing included providing sovereign guarantees on loans that the National Highways Authority of India raises from the market.

Headed by Planning Commission member B K Chaturvedi, the committee also comprises Road Secretary Brahm Dutt and Finance Secretary Ashok Chawla.

The committee will also begin working on the second part of the report. This will deal with a new dispute resolution mechanism, providing financing to road builders and making changes in the company law to make the special purpose vehicles more powerful.