One-time fund infusion for stalled road projects

CCEA decision to benefit projects under build-operate-transfer mode

The National Democratic Alliance government will give a one-time financial assistance to revive 'physically incomplete and languishing' national highway (NH) projects left unfinished by the previous Congress dispensation. The three stalled NH projects, where 50 per cent of the construction has been completed till November 30, 2014, will qualify for this.

The Cabinet Committee on Economic Affairs' decision to infuse Rs 878 crore is likely to benefit all three build-operate-transfer, or BOT, (annuity) mode projects. Of the three, the government has already received two applications for capital infusion of Rs 703 crore for stretches running from Chhapra to Hajipur in Bihar, and Krishnangar to Behrampur in West Bengal.

"We will evaluate the application and a decision on them will be taken shortly," a source told Business Standard on condition of anonymity.

"One-time fund infusion will be a big help for half-completed national highway projects. Banks have already sanctioned credit for many projects. When equity comes in, banks can lend money for completing the projects. This would cut down the stress in the roads sector," said Arundhati Bhattacharya, chairman, State Bank of India.

The third stretch where 50 per cent of the construction work is complete is somewhere between Patna and Muzaffarpur in Bihar. The government is yet to receive an application from the concessionaire for capital infusion.

"The decision will allow the provisions of the policy circular of the National Highways Authority of India (NHAI) issued in June this year on one-time fund infusion for BOT (toll) projects, to be extended and made applicable in case of languishing projects on BOT (annuity) mode, subject to the condition that after completion of construction of such projects, loans are to be recovered along with interest at the rate of bank rate plus two per cent by NHAI from the annuities payable, biannually, through execution of a tripartite agreement among the senior lender, concessionaire and the authority," the government said in a statement.

According to Madan Sabnavis, chief economist, CARE Ratings, the effect will be limited because it covers only those projects which are half-completed. "It will help projects where funding was an issue, but if it was land or environment issue, those projects will still face challenges. Hence, it is a positive for the sector. But we still need to see how many qualify and how long the project completion takes. Also, one needs to know the cost for government as it is outside the Budget."

In May this year, the government had taken an in-principle decision to bail out stalled BOT (toll) highway projects. Thus far, the government has received four applications for capital infusion to the tune of Rs 959 crore. Overall, 12 such projects are delayed and it is estimated that Rs 3,235 crore would be required to put them back on track.

According to CRISIL, nearly half the road projects being constructed under the BOT model, with a sanctioned debt of Rs 45,900 crore, are at a high risk of not being completed.

It is believed the new policy will provide cushion to all stakeholders in the public-private partnership arrangement - NHAI, lenders and concessionaires - resulting in revival of the sector.

(With inputs from Abhijit Lele in Mumbai)