Relax exit norms for developers: Kelkar Committee

A host of recommendations suggested by the Vijay Kelkar Committee on the roads sector include increasing the concession period, introducing viability gap funding, relaxation of the exit clause, disposing of cases in a time-bound manner and introducing shadow bids.

The report recommended that the National Highways Authority of India focus on projects with longer build-operate-transfer (BOT) concession periods in which the concessionaire can opt for revenue share after amortisation of major capital investments. For projects that are not viable in BOT due to traffic and high capital cost, options to fund the project through hybrid models like viability gap funding, part annuity, operation and maintenance grants, and debt instruments can be explored. The report suggested the exit clause for road developers be relaxed to enable concessionaires to monetise their entire equity investment after the commercial operations date, subject to clearance by lenders.

In May 2015, the Cabinet Committee on Economic Affairs had permitted 100 per cent equity divestment after two years of completion of construction for BOT road projects for concessions signed prior to 2009. The report pointed out that the NHAI could approve changes in ownership in a definite time-frame. It also suggested all pending disputes, including change of scope, delayed land handover, delayed commercial operations, termination, cost overrun, delayed payments, penalties and claims, be disposed of in a time-bound manner through an independent body with representatives of the NHAI, developers, lenders and an independent chairman.

The report said the concessioning authority could undertake detailed project development activities and financial viability analysis to estimate a shadow bid, which could be used to benchmark actual bids. A bidder quoting a high revenue share can be asked to justify it. On assessment, if the concessioning authority finds the bid unviable, it should be prepared to reject it.

The report suggested the penalty mechanism be in monetary terms, which helps the BOT operator remain in the same financial position as estimated at bid-award.