Govt clears way for stalled road projs;revives response to BOT

In a major respite to the highway developers, the government today allowed developers to exit road projects two years after they are completed, a move that will help in unlocking investments to the tune of Rs 4,500 crore.
The decision by the Cabinet Committee on Economic Affairs (CCEA) will help in unlocking these investments that can be re-invested to lay down 1,500 kms of new highways on PPP mode, thus reviving the private sector's response to Build, Operate and Transfer (BOT) projects.
Besides, the special intervention on projects that are at advanced stages of completion but are stuck due to lack of additional equity or lender's inability to disburse further can help revive about 16 road projects languishing in various parts of the country.

"The CCEA has approved two major policy initiatives aimed at improving the availability of equity in the market on the one hand, while on the other has authorised NHAI to intervene in languishing projects suffering from lack of funds," said an official statement.
The CCEA has also approved a comprehensive Exit Policy framework that permits concessionaires or developers to divest 100 per cent equity two years after completion of construction, it added.
In the last few years, public-private partnership (PPP) projects have not been able to attract bids and one of main reasons behind this is the lack of availability of equity in the market among qualified bidders.

The government decision will help in unlocking equity from completed projects making it potentially available for investment into new projects, the statement said.

Besides, it will harmonises conditions uniformly across all concessions signed prior to 2009 with the policy framework for post 2009 contracts which permit divestment of equity up to 100 per cent, two years after completion of construction.
There are 80 BOT projects awarded before 2009 completed and the locked-in equity in these projects works out to be around Rs 4,500 crore.
Once this amount is unlocked and re-invested in new projects, it could support 1500 kms of new highways on PPP mode, reviving the response to BOT projects.

BOT is an arrangement in which a private company builds an infrastructure project, operates it and then transfers the ownership to the government.
Generally, the government becomes the company's only customer and gives assurance to acquire a predetermined amount of the project's output, thereby ensuring that the firm recoups its initial investment in a set time span.
That apart, of the ongoing 240 PPP projects, some are languishing due to delays on account of land acquisition, grant of statutory clearances, local issues and shortage of construction materials.