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Government allows firms to exit road projects: NHAI to fund stalled ones

The government on Wednesday allowed developers to exit highway projects two years after they are completed, a move that will unlock investments worth Rs 4,500 crore and provide renewed thrust to the sector.

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Updated:May 13, 2015, 4:17 PM IST
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Government allows firms to exit road projects: NHAI to fund stalled ones
The government on Wednesday allowed developers to exit highway projects two years after they are completed, a move that will unlock investments worth Rs 4,500 crore and provide renewed thrust to the sector.

New Delhi: The government on Wednesday allowed developers to exit highway projects two years after they are completed, a move that will unlock investments worth Rs 4,500 crore and provide renewed thrust to the sector.

The Cabinet Committee on Economic Affairs also approved a special intervention for the projects that are at advanced stages of completion but are stuck due to lack of additional equity or lender's inability to disburse further.

"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.

CCEA has approved a comprehensive Exit Policy framework that now permits concessionaires or developers to divest 100% equity two years after the completion of construction, it said.

During the last few years, public-private partnership (PPP) projects have not been able to attract bids; one of the primary reasons being lack of availability of equity in the market among qualified bidders.

This would help unlock equity from completed projects making it potentially available for investment into new projects, said the statement.

Besides, it will harmonise 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%, two years after completion of construction.

There are 80 such Build, Operate and Transfer (BOT) projects awarded prior to 2009 that have been completed and the locked in equity in these projects works out to approximately 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.

That apart, out of 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.

"NHAI has been authorised to provide funds to such projects from within its overall budget or corpus on a loan basis at a pre-determined rate of return. This loan is to be recovered along with interest as the first charge from the toll receipts immediately after completion of construction," the statement said.

The government hopes that about 16 such projects languishing in various parts of the country where public is facing difficulty on account of incomplete works will benefit from this decision.

This will also add momentum to the overall growth of the highways sector in India which is already on the path of revival.

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