Cabinet may take up Road Ministry's proposal to amend MCA

The Cabinet may this week take up the Road Ministry's proposal that seeks to allow highway developers to exit projects immediately after completion of projects without attracting any penalty but only with lenders' approval.

At present, road developers can exit projects only two years after beginning of commercial operations. For projects awarded before 2009, concessionaires at no point of time can exit projects fully.

A Road Ministry official said the proposal seeks to allow highway developers to exit under the clause of Substitution (Agreement) in the Model Concessionaire Agreement (MCA).

He added that this will help a developer, which is good in executing the project but may not possess operational expertise, to exit contract once the work is completed.

The proposal has been moved for the approval of the Cabinet, he said.

Substitution agreement is between NHAI (National Highways Authority of India), lenders and the Concessionaire (developer).

As per the Substitution Agreement, NHAI and the concessionaire have the right to seek substitution of the concessionaire in accordance with the provisions of the agreement.

The official said the amendment to the MCA will bring the necessary change and will be applicable not only to future projects but also the contracts which have been completed so far.

That developer could be replaced by another firm which will be chosen by lenders to operate the project, the official said.

Last week, the Cabinet Committee on Economic Affairs had empowered the Road Transport and Highways (Ministry to decide on the mode of delivery and amendments in regard to agreements with developers. This move is expected to fast track highway projects.