Even as the pace of execution and awards in the roads sector picks up pace, a host of half-finished projects entailing investments of close to Rs 45,000 crore are languishing. While National Highways Authority of India (NHAI) has agreed to fund these stalled projects, builders are reluctant to use the money since it would mean giving the authority the first right to cash flows,
NHAI has told developers it would be willing to fund half-done build, operate and transfer (BOT) projects provided it accesses the toll receivables first. The additional funding — at 2% over the bank rate — would have benefited some 50 projects across developers.
However, bankers are unwilling to give up their rights to the cash flows. A senior executive with a public sector bank said lenders had conveyed their reservations on the proposal to NHAI. “If NHAI debt is given preference we might not be able to recover our dues from the project,” he said.
A senior executive at an infrastructure firm told FE that while NHAI’s intentions may have been sincere, the condition had not been prudent.“Instead of asking for a senior debt status, NHAI should have treated the bridge loan on a pari-passu basis,” the executive observed.
However, some lenders are attempting to find a solution to the problem. Kamlesh Chechani, vice-president (finance), Supreme Infrastructure, told FE that although it was not directly involved in the negotiations, it was aware State Bank of India had agreed to a priority fee being paid to NHAI in lieu of extra funding by the authority. This development is related to the firm’s Panvel-Indapur project.
“We have not received anything in writing as yet but an in-principle agreement has been reached between SBI and NHAI,” Chechani said. The Rs 940-crore road project has been stuck due to delay in land acquisition.
Among the road projects that remain incomplete include those of Madhucon Projects, Era Infrastructure, Abhijit Group, Ramky Infrastructure and Supreme Infrastructure. India Ratings estimates 30% of these projects have been constructed in the BOT mode and are annuity-based projects while the majority are toll projects.
Meanwhile, roads continue to be built at a good pace with the completion run rate in May at 22 km per day, according to analysts at Jefferies. If the target of 15,000 km in FY17 — as put out by the roads ministry — is to be achieved, it would call for funding of close to Rs 1,50,000 crore. Of this a provision for Rs 55,000 crore has been made in the Budget for FY17, with another Rs 15,000 crore to be mopped up via bonds. The ministry is planning to raise some amount from Life Insurance Corporation of India and the Employees’ Provident Fund Organisation. There is also a proposal to monetise assets.