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The National Highways Authority of India (NHAI) has asked banks to hold joint meetings with it before lending to road infrastructure projects. The authority feels often, lenders are either misguided or spend more than what is required on infrastructure projects.
“We have held a meeting with the bank association (Indian Banks Association), as we feel we need to sit together before a bank decides to lend a certain amount of money. Often, we have an estimate on the project, but the concessionaire and the banks feel the estimate is not correct and come up with their own, which is very high. Then, banks lose out if something happens to the project,” said a senior NHAI official.
He added willingness on the part of banks to spend more than what was required for projects led to a number of projects being held up. “In the past, they went and gave more funds. When the projects face a problem, they lose out. Now, they are not willing to lend for road projects and that’s why projects are held up,” the official said.
The decision to hold joint meetings follows NHAI’s recent letter to State Bank of India (SBI), asking the bank to explain why it granted more than Rs 3,300 crore to Soma Enterprise for the Panipat-Jalandhar highway. While SBI had said its estimate was in accordance with its study, NHAI officials maintained the project estimate was very high.
In its letter, NHAI had said, “We estimated the project cost at Rs 2,747.5 crore, while your estimate was Rs 4,518.17 crore and the lender’s contribution was Rs 3,389 crore.”
SBI is the lead lender for a consortium of banks funding Soma Enterprise. Road projects have been facing delays through the past few years. The road ministry is yet to record financial closure for about 30 projects awarded in the past few years.
In addition, land acquisition delays have forced it to go slow on projects, especially in an election year. Recently, NHAI had cancelled six projects worth Rs 4,000 crore, owing to hurdles on the land acquisition front.
Banks and financial institutions lending to road projects have refrained from investing in these, primarily due to projects not taking off or financial mismanagement by concessionaires.
Also read
Sep 14: SBI, NHAI spar on overlending to Soma
mybs.in/10a24
ROAD BLOCK
* NHAI to have more meetings with lenders to reach a consensus before giving money to a project
* Decision follows NHAI's letter to SBI questioning giving excess funds to Soma for Panipat-Jalandhar project
* SBI gave Rs 3400 crore for the project as debt, valuing project cost at Rs 4518.17 crore
* NHAI's estimate for the project was Rs 2747.5 crore
* NHAI officials say such funding is bad for the road sector
“We have held a meeting with the bank association (Indian Banks Association), as we feel we need to sit together before a bank decides to lend a certain amount of money. Often, we have an estimate on the project, but the concessionaire and the banks feel the estimate is not correct and come up with their own, which is very high. Then, banks lose out if something happens to the project,” said a senior NHAI official.
He added willingness on the part of banks to spend more than what was required for projects led to a number of projects being held up. “In the past, they went and gave more funds. When the projects face a problem, they lose out. Now, they are not willing to lend for road projects and that’s why projects are held up,” the official said.
The decision to hold joint meetings follows NHAI’s recent letter to State Bank of India (SBI), asking the bank to explain why it granted more than Rs 3,300 crore to Soma Enterprise for the Panipat-Jalandhar highway. While SBI had said its estimate was in accordance with its study, NHAI officials maintained the project estimate was very high.
In its letter, NHAI had said, “We estimated the project cost at Rs 2,747.5 crore, while your estimate was Rs 4,518.17 crore and the lender’s contribution was Rs 3,389 crore.”
SBI is the lead lender for a consortium of banks funding Soma Enterprise. Road projects have been facing delays through the past few years. The road ministry is yet to record financial closure for about 30 projects awarded in the past few years.
In addition, land acquisition delays have forced it to go slow on projects, especially in an election year. Recently, NHAI had cancelled six projects worth Rs 4,000 crore, owing to hurdles on the land acquisition front.
Banks and financial institutions lending to road projects have refrained from investing in these, primarily due to projects not taking off or financial mismanagement by concessionaires.
Also read
Sep 14: SBI, NHAI spar on overlending to Soma
mybs.in/10a24
ROAD BLOCK
* NHAI to have more meetings with lenders to reach a consensus before giving money to a project
* Decision follows NHAI's letter to SBI questioning giving excess funds to Soma for Panipat-Jalandhar project
* SBI gave Rs 3400 crore for the project as debt, valuing project cost at Rs 4518.17 crore
* NHAI's estimate for the project was Rs 2747.5 crore
* NHAI officials say such funding is bad for the road sector
