<div><strong>By Simar Singh</strong></div><div> </div><div>More than half of the highway projects being constructed under the BOT(build, operate, transfer) model are at a high risk of not being completed, says a report released by CRISIL (Credit Rating Information Services of India Limited). </div><div> </div><div>The report titled ‘No Smooth Ride’ claims that around 7,500 kilometres of highway projects — 5,100 kilometres under construction and 2,400 kilometres operational, mostly awarded between FY 2010 and FY 2012 were under risk.</div><div> </div><div>According to the study, the primary reasons for time and cost overrun in projects and the low overall progress of highway construction in India was right of way or land issues. CRISIL’s analysis of 92 highway projects being constructed under the BOT model indicated that around 50 per cent of them were facing implementation risks as a consequence of delays in land acquisition and other clearances.</div><div> </div><div>Another reason for stalled projects, according to the study, are the weak financials of sponsors. Their inability to bring in equity as well as support for cost overruns in a timely is expected to aggravate matters.</div><div> </div><div>In the period when these projects were awarded many developers debuted into the BOT space, only to run into financial issues due to their inexperience in estimating risks which resulted in undervaluation.</div><div> </div><div>The report goes on to analyse that the resurrection of these projects would require a 37 per cent growth in toll revenue. However, there is no agenda for toll rate hikes at present.</div><div> </div><div>There have been some initiatives at reform that have been taken by the government to amend the situation, such as a lull in the rate of awarding projects in FY 2013 and FY 2014. The NHAI has also decided to extend developer loans to projects that are more than 50 per cent complete and around 50 projects qualify for such loans. Under the watch of the Prime Minister’s Office, there have been attempts to address land acquisition problems and to fast-track clearances as around 80% of under-construction projects bogged down by these two issues. In fact, around 25 per cent of the projects were terminated because of nagging land acquisition problems and inability to achieve financial closure.</div><div> </div><div>However, the CRISIL report believes that only by 2017 will these reforms see any real results.</div><div> </div>
