Road project delayed? You can now request NHAI for funds

Subsequent to the government allowing it to provide funds to road projects that are close to completion but are stuck due to equity crunch, the National Highways Authority of India (NHAI), has now asked developers to approach it with a financing plan that justifies their request for a fund infusion from the NHAI.

In its communication in this regard the NHAI says, "The concessionaire seeking such relief shall approach the NHAI with an application which shall clearly state the financing plan required for completing the project construction and justifying a one-time fund infusion."

To accelerate highways building and salvage stuck road projects, NHAI will now be able to provide the much-needed financial assistance from a corpus set up to financially assist any delayed highway project in the BOT (build, operate and transfer) mode that has achieved a minimum 50 percent physical completion but needs a infusion of funds to reach its completion.

According to informed sources, the assistance would be provided in the form of a loan at bank rate, plus 2 percent drawing a parallel with the provisions of the model concession agreement.

NHAI also plans to develop a robust third party evaluation mechanism to determine the eligibility of the concerned projects that approach it for a fund infusion and the quantum of financial assistance required to ensure its completion.

According to industry estimates of the 240-odd ongoing Public-Private-Partnership or PPP projects that are in various stages of construction, many have been delayed extensively for a variety of reasons ranging from delays in land acquisition, a fund crunch, local complications, shortage of construction materials and in some cases the absence of statutory clearances from the relevant agencies.

Leading industry experts further opine that such liquidity constraints, approval delays and the lingering slowdown have forced developers not to take up large infrastructure and road projects on a PPP basis, compelling government agencies to award projects as cash-contracts.

The government has laid emphasis on developing infrastructure projects on the public private partnership model to reduce its burden and to encourage private sector participation in infra development projects. However, the current economic scenario is impacting developer sentiment with a majority of them unwilling to accept the risks attached with PPP projects.

On the flip side however, developers are more than willing to bid for EPC projects as the risks involved in the latter model are far much lesser as compared to the PPP model, with the funding risk borne mostly by the government.

Large infrastructure projects like the INR 9,630 CR Mumbai Trans-Harbour Link, the INR 23,000 CR Colaba-Seepz underground metro line, INR 1,300 CR water transport along the east coast and INR 750 CR passenger water transport along the West Coast among others have been allotted on an EPC basis after failing to receive the desired response on the PPP platform.

In a series of steps announced last month to revive stalled infra projects, the government had approved a special assistance for the estimated 16 PPP projects that were in an advanced stage of completion but were unable to proceed either due to the lack of additional equity or the lender's inability to infuse the required funds to complete the project.

In keeping with the scheme the NHAI has begun the process of inviting applications from developers of such stalled projects, stating that the approval of key lenders would be sought for providing financial aid to ensure the completion of such projects in a time-bound manner for the benefit of the public.

It may be recalled that the government had earlier set a target of building approx 6,300 kms of roads every year (from 2013-15), of which about 4,260 kms and 4,410 kms were achieved respectively.

Upping the ante, the government has now decided to hasten the pace of road building in the country and has increased the target from the existing 14 km per day to 30 km per day.