Roadmin asked to seek Rangarajan advice on classification of bank loans

In the absence of collateral, these advances are now treated by the RBI as “unsecured”, leading to a waning of lender interest in highway projects. The land on which a road is build belongs to the government and hence a concessionaire company cannot pledge it to the lenders as a collateral. The PMO has asked secretary, road transport and highways, AK Upadhyay, to send a note to Rangarajan on the issue. Singh asked his economic advisory council to look into the issue.

The government is also considering an amendment in the model concession agreement (MCA) for road projects to remove the restrictive cap of extension in the concession period by 20% if revenues fall short of targets. This, the highways ministry feels, would enable the RBI to classify the advances to these projects in the secured category. The decision was taken on Thursday after Singh reviewed the progress of various projects in the transport sector — railways, roads and shipping.

Last month, the National Highways Authority of India (NHAI) discussed the problems in PPP projects in roads with the finance ministry and Planning Commission. A senior government official privy to the meet told FE that the department of financial services had

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