Consultants Suggest Changes In Road Pact

The two foreign consultants who desk reviewed the draft concession document for road projects have suggested some changes in the termination guarantee clauses.

Early this month, the National Highways Authority of India (NHAI) had sent the draft document to Cameron mcKenna's Hong Kong office and Price Waterhouse in London for desk reviewing.

Both these firms are also involved in some of the state road projects in drafting bankable concession documents. Cameron mcKenna is also closely associated with the Gujarat government.

Among the major changes that the consultants have recommended are changes in the termination agreements. The termination agreements currently provide for payment net of insurance cover.

According to the draft concession agreement, the termination guarantee payments have been fixed at 175 per cent of the equity in the event of force majeaure as a result of direct political events during the operation and maintenance phase of the project.

These termination guarantees cover political events such as nationalisation and expropriation by the state.

For the creditors of the project, the termination payments have been fixed as 75 per cent of the debt.

Financial institutions and banks had pointed out that netting it against the face value of the insurance was unacceptable, for making highway projects bankable on a non-recourse basis.

Both Price Waterhouse and mcKenna have endorsed the view points of the FIs and have suggested that the termination guarantee may altered to "net of insurance admitted claims."

This would imply that in the event of projects being terminated the compensations would be netted off against claims admitted by the insurance company.

Official sources in the ministry of surface transport said that the draft document would now be taken up before the empowered committee for incorporating the changes and the committee of secretaries before being taken up by the cabinet for final clearance.

Based on this draft document, the bidders for the four-laning projects , Hosur- Krishnagiri, the Jaipur-Kishangarh and the Chingelput-Tindivanam projects are expected to taken up.

This draft document is also expected to be used for taking up the four laning of all the 77 projects which have been thrown open for private sector participation.