<div><em>Move to unlock thousands of crore which could fund new highway construction, reports <strong>Ashish Sinha</strong></em></div><div> </div><div>In a major move aimed at expediting award and implementation of highway projects by making additional funds available for investment in projects, the central government has allowed road developers to divest 100 per cent equity after 24 months of completion of all infrastructure projects constructed under the Build, Operate and Transfer (BOT) mode.</div><div> </div><div>On August 26, the Cabinet Committee on Economic Affair made amendments to its earlier approval of 13th May, 2015 .</div><div> </div><div>The move is expected to benefit at least 80 odd BOT projects that were awarded prior to 2009. Estimates suggest that the locked equity in such projects may be in excess of Rs 4,300 crore. Some reports suggest the unlocked amount could support at least 1,500 kilometres of new highways.</div><div> </div><div>Infrastructure companies like Ashoka Buildcon, IRB Infra, Reliance Infrastructure among others are expected to gain from this policy decision, experts said. In fact, the stocks of IRB Infrastructure Developers and Ashoka Buildcon had witnessed over five per cent gains on August 27, a day after the official announcement was made.</div><div> </div><div>Simply put, under BOT mode the developer builds and operates a stretch of road for a stipulated time period and earns through toll revenue or through timely payments from the government.</div><div> </div><div>Experts said the CCEA approval will now allow the concessionaire(s)/promoter(s) to use proceeds from the sale of divested equity in one or more of an incomplete National Highway Authority of India projects or any other highway projects. It will also help them retire their debt to financial institutions in any other infrastructure projects.</div><div> </div><div>“This will result in physical completion of languishing infrastructure projects. This in turn will bring relief to citizens /travellers in the concerned area,” an official statement issued by the government said. “Consequently, it will facilitate uplifting socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country. This will also lead to enhanced economic activity,” it added. </div><div> </div><div>On May 13, 2015, CCEA had approved the proposal of the Ministry of Road Transport and Highways, to make applicable mutatis mutandis the provision of Model Concession Agreement (MCA) pertaining to the exit option for selected bidder/consortium members together with their associates. Subsequently, NHAI issued policy circular dated 9th June 2015 with this effect.</div><div> </div><div>However, subsequent to the NHAI policy circular, the National Highways Builders Federation (NHBF) made a representation that all developers were not having incomplete highways projects thus were denied of this facility for no fault. NHBF said most developers in the infrastructure sector were carrying highly leveraged balance sheets at their Holding Companies level, as they have been simultaneously supporting various infrastructure Special Purpose Vehicles which were also under severe stress. “These developers can be allowed to utilize funds so generated to reduce their existing corporate debt or for investment in any new infrastructure project that need not alone be highways projects, as most developers have multiple verticals in the infrastructure sector,” NHBF had suggested.</div><div> </div><div>NHAI after examining the representation of NHBF is also of the opinion that full benefits of this policy decision/circular can also be leveraged, if certain amendments are made to the above said decision. NHAI has also suggested that the policy circular dated 9th June 2015 may be amended accordingly to make the policy applicable in its true spirit. This was endorsed by the CCEA on August 26.</div><div> </div><div> </div><div>ashish.sinha@businessworld.in</div><div> </div>
BW Reporters
Ashish Sinha is an experienced business journalist who has covered FMCG, auto, infrastructure, tourism, telecom among several other beats. Ashish has keen interest in the regulatory scenario impacting different sectors. He writes on aviation, railways, post and telegraph, infrastructure, defence, media & entertainment, among a wide variety of other subjects.
