 "NHAI")
The National Democratic Alliance government’s Bharatmala project, which seeks to improve the country’s national highway network, might put existing road projects in a tight spot, leading to lower traffic and disputes.
According to a report of rating agency Icra, 25 road projects with a debt of Rs 194.35 billion might be at risk.
“The Bharatmala network, designed on the shortest possible route connecting the origin and destination, though well-thought-through and a step in the right direction, is bound to impact the existing network by directly competing with a few stretches, including some of the existing build-operate-transfer (BOT) (Toll) road projects,” the rating agency said in its statement.
Icra has assessed the impact of the proposed 44 economic corridors (ECs) under the Bharatmala Pariyojana on the existing road network in terms of traffic diversion, which could, in turn, affect the debt-servicing ability of some BOT and operate-maintain-transfer (OMT) projects.
Of the 44 ECs, about 21 are expected to partially or fully affect the existing alignments, according to the report. “The remaining 23 corridors involve the upgrade of existing alignments and will not result in any deviation from existing alignments,” the report said.
Among the 21 corridors that affect the existing network, the report said, eight have the shortest distance between the origin and destination, while the remaining 13 also have some deviations from the current alignments.
According to Icra’s analysis, there are 25 projects — 24 BOT and one OMT — whose traffic could be affected owing to the proposed ECs.
In October last year, the Union Cabinet had cleared the Bharatmala project to construct 24,800 km of highways, connecting the western and eastern parts of the country, at an estimated investment of Rs 7 trillion. It is the largest highway project after the National Highways Development Programme, under which about 50,000 km was developed, and aims at improving connectivity in border and other areas.
In the first phase, to be undertaken over three-five years, the project will cost Rs 5.5 trillion.
Shubham Jain, vice-president and sector head for corporate ratings, Icra, said: “The risk of traffic diversion is assessed on the basis of traffic mix, long-distance traffic and key feeder routes. The traffic diversion risk for about 72 per cent of the projects is low, while 16 per cent of the projects have a moderate risk and the remaining 12 per cent of the projects have a high risk of leakage in traffic with the availability of an alternative route.”
The report stated affected projects might not get much relief under the concession agreement provisions. “Although Article 30 of the concession agreement extends protection to the BOT projects by restricting the construction of additional tollways, this clause is not applicable if the length of such additional toll roads exceeds that of the existing route comprising the project highway by 20 per cent.
The stretch under ECs of Bharatmala is either longer by more than 20 per cent or traverses a new route completely and hence does not fit the description of additional tollways as defined in the concession agreement. Therefore, traffic loss/diversion arising out of these would not be compensated under the concession agreement,” Jain said.
This, in turn, might lead to further disputes between the developer and NHAI. “In extreme cases, the concessionaire may opt for terminating the concession agreement. In most cases this may end in dispute with the National Highways Authority of India or the NHAI invoking the concessionaire event of default (which is the case with most of the terminated projects till now),” Jain said in the report.
Icra said the termination payment in the case of a concessionaire event of default was equivalent to 90 per cent of the debt due. However, according to Icra research, in around 40 per cent of the BOT projects, the debt sanctioned is higher than the project cost, resulting in a shortfall in termination payments.
What is at risk?
- Debt worth Rs 194.35 billion at risk
- 24 build-operate-transfer road projects to be affected
- One operate-maintain-transfer project to be affected
- 21 of 44 Bharatmala economic corridors to partially or fully affect existing alignments
