Cabinet approves project-exit policy for highways developers

The government on Wednesday approved a project-exit policy for highway developers and also authorised the state-run National Highways Authority of India (NHAI) to intervene in languishing projects that are suffering from lack of funds.

The Cabinet Committee on Economic Affairs (CCEA), in a meeting here chaired by Prime Minister Narendra Modi, cleared the two proposals to give a renewed thrust to the highways sector.

According to the CCEA, the comprehensive 'exit policy' framework now permits developers to divest 100 percent equity two years after the completion of construction.

"It is relevant to note here that during the last few years, PPP projects have not been able to attract bids; one of the primary reasons being lack of availability of equity in the market among qualified bidders," the CCEA said in a statement adding that the move will unlock equity from completed projects that can then be re-invested into new projects.

"This decision will also harmonise conditions uniformly across all concessions signed prior to 2009 with the policy framework for post-2009 contracts," the statement said.

The statement pointed out that there are 80 such Build, Operate and Transfer (BOT) projects awarded prior to 2009 that have been completed and the lock-in equity in them works out to be Rs.4,500 crore.

"Once this (equity) is unlocked and is re-invested in new projects, this could support 1,500 kms of new highways in PPP mode, thus reviving the response to BOT(T) projects," the statement said.

On the decision to allow NHAI to intervene in languishing projects, the CCEA said the approval is for projects that are in advanced stage of completion but are stuck due to lack of additional equity or the lenders' inability to disburse funds further.

The statement elaborated that NHAI will provide funds to such projects from within its overall budget on a loan basis at a pre-determined rate of return.

"This loan is to be recovered along with interest as the first charge from the toll receipts immediately after completion of construction," the statement added.

Estimates with the government show that there are 16 projects that are languishing in various part of the country due to lack of funds.