Given the IDFC-led consortium stood to lose all the R1,600 crore it had lent to the Delhi Gurgaon expressway if NHAI chose to terminate the concession as NHAI had not recognised it as a designated lender, it is good news that a solution has been reached. Apart from taking on the dues of the previous franchisee, IDFC has agreed to knock off one of the two toll plazas. This was the original bone of contention since traffic pile-ups here were the reason why NHAI wanted to terminate the concession. While IDFC which plans to run the expressway itself can theoretically make up the loss by the extra toll at the second plaza—the toll has been hiked to take into account the first plaza being removed—this applies only to the traffic that passes through it. A large part of the traffic from Delhi that passes through the first toll plaza, however, terminates at Gurgaon and does not pass through the second one.
While IDFC still thinks the project is viable, there are a few disturbing aspects of the agreement. For one, NHAI refusing to recognise IDFC as a lender for several months is problematic—only once it was recognised as a lender could IDFC substitute the first franchisee with a more efficient operator to avoid the termination of the concession. NHAI argued that such recognition would force it to take on more liabilities—it has to pay 90% of outstanding debt upon termination to the lead lender—since when IDFC took over the loan from the earlier lenders, it had lent more money to the original franchisee. Which is why, in the final agreement signed on Wednesday, it was agreed the project debt which NHAI has to pay on termination would be retained at the R1,142 crore it was when SBI was the lead lender. There is some confusion here that needs to be cleared since rolling over of lenders is natural in all such long-term lending. The Delhi Gurgaon agreement, on NHAI’s website, says the debt and equity will be determined on the basis of the project cost and the definition of project cost suggests this is the original cost; if NHAI, however, sought to clarify this in Wednesday’s press release, it suggests there is confusion on what debt/equity are. If it is made clear the debt/equity does not change with a new lender but remains the same as in the original project, the