Ease exit norms to free up equity for new highway projects: Survey

Written by fe Bureau | New Delhi | Updated: Feb 28 2013, 10:16am hrs
In a bid to drive out the highways sector from a severe financial crunch, the Economic Survey proposed to ease exit norms for developers to free up equity for new projects.

In current market conditions, these firms are unable to raise new equity. Exit route needs to be eased so that promoters can sell equity positions after construction, passing on all benefits and responsibilities to entities that step in, the survey, presented in Parliament on Wednesday said.

Promoters can use the equity thus released for new projects, it said adding: steps are also needed to up-scale projects in PPP mode for achieving the targets envisaged for the development of roads in the Twelfth Plan.

Under the norms in place since November 2009, developers must hold at least 26% of equity up to two years after the commercial operation date (COD). Moreover, developers of build-operate-transfer (BOT) projects awarded before 2009 do not have the option to exit completely.

The road sector is in the middle of a crisis period with the governments plan to rope in more developers under build-operate-transfer (BoT) toll model is not receiving a good response. The road ministry has been able to award just around 1,000 km of projects against the target of 9,500 km for this fiscal, ending next month.

Faced with the developer disinterest, the ministry has decided to award more projects on the EPC mode. Under the EPC model, the government spends the entire money required to build roads so as to attract builders who are shying away from highways projects for want of funds.

The survey has also highlighted that the governments initiative for providing a 100% government funding to the developers will take care of cost and time overruns.

As of December, six sectors, including roads, accounted for about 80% of all stalled projects, and as many as 86 of the total 146 projects were delayed.

The survey also highlighted that the National Highways Authority of India (NHAI) Board has approved formation of a high-level expert settlement advisory committee for one-time settlement of old cases pending in courts. The new introduction of the passive radio frequency identification (RFID) technology, based on electronic toll collection, will also boost revenue collection from the highways sector.

Talking about the delays in environment clearances, it said the ministry of environment and forest (MoEF) has been requested to relax the condition of mandatory environment clearance (EC) for areas less than 5 hectare.

The Survey said NHAI has achieved 17.3% growth in widening and strengthening of highways during April-November 2012. The achievement under various phases of the National Highways Development Project (NHDP) up to December 2012 has been about 1,605 km, and projects have been awarded for a total length of about 878 km, it added.