IIFCL for alternative highway funding ways

Written by fe Bureau | New Delhi | Updated: Aug 1 2009, 05:25am hrs
SS Kohli, chairman of the India Infrastructure Finance Company Ltd (IIFCL) has called for alternative funding mechanisms for highway projects and early enactment of amendments to the Land Acquisition Act as part of a 10-point action plan to achieve Road transport and highways minister Kamal Naths ambitious plan of building 20 kilometres of highways daily.

With highway funding forming 35% of IIFCLs portfolio, Kohli suggested a slew of measures based on his experience in the sector. These include new funding mechanisms, reducing the period for financial closure of a highway project to three months, tax exemptions, bidding out only four to five projects at one go (instead of 20-30) and the early enactment of the Land Acquisition Amendment Bill 2009 and the National Rehabilitation and Resettlement Policy Bill 2009.

Speaking at a Ficci seminar on Thursday, Kohli pointed out the need for alternate financing to toll as many projects are unviable due to high construction cost and low revenue. Under this, annuity at a pre-determined level would be payable till the traffic reaches a certain criteria, he said. Alternatively, Kohli said, Uniform annuity can be changed to differential annuity payments, whereby larger amounts of annuity are paid in the beginning and the amount paid gets reduced after a certain period.

Significantly, Kohli also suggested that special purpose vehicles set up for infra projects should be saved from double taxation by permitting them to channelise profits towards equity for new projects, instead of declaring dividend to the holding company and paying Dividend Distribution Tax (DDT). To ensure speedy completion of projects, he also suggested incentives to private developers who deliver projects on time.

The recommendations also included resolving disputes between the concessionaires and the National Highways Authority of India (NHAI) by setting up Lok Adalats. Although they are not alternative to courts, they supplement the court and help settling litigation by negotiation, arbitration or conciliation, he observed.

Promising to examine Kohlis suggestions at the meeting, Kamal Nath highlighted the need to restructure and build capacity of the NHAI as most of its officers are on deputation and are in the departure lounge. NHAI Chairman Brijeshwar Singh, speaking on the sidelines of the seminar, said the Authority would hire 400 people in the next 18 months to deal with a severe manpower crunch faced by it.

Nath also stressed on the need to speed up land acquisition for road projects. We will fix responsibilities on project directors, and chief general managers of projects, as there has to be accountability for both acts of commission and omission, he declared.

The road map

Project SPVs should be allowed to participate in

more projects

A shell company concept needed on the lines of ultra mega power projects

Meetings with developers and stakeholders to iron

out problems

Approval and construction of railway over bridges where railway authorities are involved

Obtaining forest clearances from the state and Central authorities

Approval of Right of Way for diversion of traffic on existing roads where four laning is in progress