Govt to clear lenders’ road project blocks

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Timsy Jaipuria: New Delhi, Dec 05 2012, 00:25 IST

In an attempt to revive lenders’ interest in highway projects, the government is planning to provide them the comfort of being able to change the concessionaire in the event of suspension. At a recent meeting attended by representatives from the ministry of finance, Planning Commission, the roads and highways ministry and NHAI, it was decided to include an explicit provision to this effect in the model concession agreement (MCA).

Currently, the relevant clause — Article 5.2.4 of MCA — does not clearly provide for the lender to step in and take over the project or propose a new buyer to recover loans, making it difficult for it to recover loans from the developer or NHAI in case of any failure in project execution/revenue mobilisation.

Sources said the meeting agreed on the need for NHAI to physically hand over 80% of the land (right of way) to the developer before he is appointed by the authority. In the case of new alignment including bypass, 100% of the road portion will be in NHAI’s physical possession before the appointed date. This decision was taken in view of the “failure of NHAI” in making available all the requisite land for projects in time, due to which developers often fail to start operations as scheduled and meet toll targets.

Sources said secretary-financial services DK Mittal had stressed that NHAI should make 100% of required land available for road projects before inviting tenders. However, the authority’s chairman RP Singh contended that giving 100% right of way to

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