<div><strong>Haider Ali Khan</strong><br><br>Around 50 projets with a total project cost of Rs 45,000 crore will benefit from Cabinet Committee on Economic Affairs decision to provide one time financial assistance via NHAI to revive and complete languishing national highway projects, according to India Ratings and Research (Ind-Ra).</div><div> </div><div>National Highway Authority of India (NHAI) has a budget of Rs 72,000 crore to spend on roads sector this year.</div><div> </div><div>Out of the total languishing highway projects as on 1 November, 2014, which have completed 50 per cent of construction, Ind-Ra estimates that 30 per cent are BOT (Build operate transfer) annuity-based projects while the balance 70 per cent are toll projects.</div><div> </div><div>It says that developers and lenders to the projects may be hesitant for such funding by NHAI, due to the clause of first charge by NHAI on the toll/annuity receivables of these projects (structural subordination) over the senior lenders’ debt service.</div><div> </div><div>Evidence suggests that in case of infrastructure debt funds - under non-banking financial company mode - existing lenders were reluctant to agree to the structural subordination on the termination of payments. </div><div> </div><div>There are delays in getting the appropriate approvals and clearances from various government agencies. While this has resulted in project deferrals and cost overruns, it has also increased the ratio of stressed loans in the banking system.</div><div> </div><div>Bank credit to the infrastructure sector grew at a compound annual growth rate of 39.5 per cent in the last 14 years. Outstanding bank credit to the infrastructure sector stood at Rs 10.07 trillion in March 2015 compared with Rs 9500 crore in March 2001.</div><div> </div><div>According to the June 2015 Financial Stability Report of the Reserve Bank of India, infrastructure constituted 15 per cent of total advances of the scheduled commercial banks, but had a much larger share of around 30 per cent in total stressed advances. After steel sector, roads account for the second largest amount of bad loans for the banking sector.</div><div> </div><div>The average daily road construction has dropped to 4.1 km in FY 2015 from an all-time high of 7.4 km in FY 2013.</div>
