More power for lenders in road sector PPPs soon

“This provision adversely impacts the interest of lenders,” the official said. He added that the National Highways Authority of India and the Planning Commission have agreed to amend the MCA to support the lenders.

In case of unwarranted delays, the interest of lenders could be protected by empowering them to invoke the Substitution Agreement even in case of termination prior to commercial operations date, the official added.

Experts say such a move will provide lenders extra benefit and a greater say in the projects to which they have funded. Feedback infra CMD and CII infrastructure committee head Vinayak Chatterjee said: “Besides financial delays, there are many other reasons behind a developer defaulting or in meeting the deadlines. In such cases, lenders feel they do not have any security or any say as per the current MCA. Thus, the proposed changes will give additional powers to lenders from their ability to secure their money.”

“This amendment will not just revive the interest of banks, but also make them less apprehensive to lend further to road developers,” said Vishwas Udgirkar partner, infrastructure, at Deloitte.

Lack of financing is becoming a major hindrance for road projects. With developers exhausting all avenues to raise equity financing, funding by banks and FIs remain key to projects achieving financial closure. However, banks worry their money may not be secure, with developers increasingly

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