CCEA approves changes in exit policy, fund infusion for highway projects

NEW DELHI, May 13: In order to provide a renewed thrust to the highway sector and to bring the private sector back on board, the Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Narendra Modi, 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 the National Highways Authority of India (NHAI) to intervene in languishing projects suffering from lack of funds. I. EXIT POLICY : The CCEA approved a comprehensive Exit Policy framework that now permits concessionaires/developers to divest 100 percent equity, two years after completion of construction. It is relevant to note here that during the last few years, 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. This decision will also harmonise conditions uniformly across all concessions signed prior to 2009 with the policy framework for post 2009 contracts which permit divestment of equity upto 100 percent, 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. 4500 crore. Once this is unlocked and is re-invested in new projects this could support 1500 kms of new highways on PPP mode, thus help in reviving the response to BOT projects. II. FUND INFUSION TO SALVAGE LANGUISHING PROJECTS : Out of the 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 etc. In conjunction with several other measures being taken to revive such stalled projects, CCEA today approved a special intervention for the projects that are in the advanced stage of completion but are stuck due to either lack of additional equity or lender’s inability to disburse further. NHAI has been authorised to provide funds to such projects from within its overall budget/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. NHAI has been directed to develop a robust mechanism to determine eligibility of the project as also the extent of funds required to complete projects in a time-bound manner. It is expected that about 16 such projects languishing in various parts of the country, where the public is facing difficulties on account of incomplete work, 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.