Leading infrastructure companies, however, termed the norms inflexible and impractical, even as only 10 out of the 40-plus projects in need of succour may qualify for the same.
Sources said that while premium payments the industry wanted restructured amounted to Rs 1.5 lakh crore, only a small fraction of this would qualify for the scheme approved on Tuesday.
Highway developers had made a last-ditch bid to salvage their stranded projects. GMR group chairman GM Rao, sources said, had called on the Prime Ministers principal secretary Pulok Chatterji twice in the last one month and pitched for premium rescheduling norms more liberal than those proposed by the Rangarajan Committee.
Rao, sources added, had told the PMO that the committees formula wasnt good enough for GMR to return to the 555-km Kishangarh-Udaipur-Ahmedabad project.
While Rangarajans criteria for projects to qualify for the premium rescheduling mechanism would anyway exclude most of the stranded projects, GMRs Kishangarh-Udaipur-Ahmedabad project (with cost estimated initially of Rs 5,387 crore) and GVKs 321-km (Rs 2,815 crore) Shivpuri-Dewas project are among the few high-profile ones seen eligible.
In a meeting with Chatterji, Rao and his team raised concerns over the committees proposal to levy penalty on those who defaulted on premium payments and introduce a provision that developers of 4-to-6-laning projects must furnish bank guarantees amounting to the premium delayed (with interest) against original time-line for payment during the period of construction.
Treating the deferred premium as revenue shortfall loan by the NHAI is an area of concern, said a source, who did not want to be identified. If the realisable fee (premium) is less than subsistence revenue, the panel said, NHAI may provide a revenue shortfall loan to the concessionaire at 2% above the bank rate (which is 10.75%, the discount rate to make good the deferred receipt of premium by NHAI) to keep the net present value of the premium amounts unchanged from previously. GMR pointed out that the discount rate proposed by the panel and now approved by the finance ministry is high.
During the UPA-II regime, road construction and project awards had slowed down considerably. Aggressive bidding incompatible with the traffic potential of various stretches bid out (partly because of the economic slowdown) and delays in clearances that have increased costs have upset developers calculations. By January-end, construction of these roads stood at just 56% of the full-year target at 4,460 km while new project awards were a dismal 14% of the target or 9,638 km, while in the previous two years, construction of new roads exceeded targets and the awards had reached record levels in 2010-11.
As per the Rangarajan Committee, the rescheduled premium will be treated as revenue shortfall loan by NHAI as per the Article 28 of the Model Concession Agreement (MCA). A stressed project, according to the panel report, would be the one which would still report a negative value after debt servicing costs, premium, operation and management costs and other expenses on construction and management are deducted from the toll collected.
Recently, the national highway builders federation had written to Prime Minister Manmohan Singh, principal secretary Pulok Chatterjee, minister for road transport & highways Oscar Fernandes and finance minister P.Chidambaram, expressing concerns over the inadequacy of the Rangarajan formula to salvage the troubled projects in the sector.