Keen to avoid termination of a clutch of road projects facing delays for various reasons and to ensure its premium revenue of close to R1 lakh crore is not affected, the National Highways Authority of India (NHAI) has proposed that the relevant concession agreements can be revisited to give these projects’ liquidity-starved developers the flexibility to reschedule premium payments. Citing precedents for such changes in concluded contracts in the telecom industry and, more recently, in the power sector, NHAI chairman RP Singh told the road minister CP Joshi that the proposal would have no adverse net revenue implication for either NHAI or the government as the NPV of the receivable premiums would remain the same as contracted.
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Stating that the potential cancellation of 21 projects and the debarment of the developers could jeopardise the Public-Private Partnership (PPP) model in the road sector, and citing the unlikelihood of a rebidding leading to the current levels of premiums given the difficult economic situation, Singh said that stringent conditions could be imposed on the concessionaires seeking rescheduling of premium. He said, for example, that drawing any return on equity can be barred for the first twelve years. That is, the entire cash flow after meeting the project requirements and debt service obligations could be used for meeting premium payment obligations.
Earlier, the law ministry had objected to the idea of opening up of concluded agreements. In his latest letter to Joshi, Singh, however, contended that the ministry might not have been apprised of the full implications of the cancellation of these project agreements. To buttress his argument, the NHAI chairman drew attention to the incidence of post-award changes in concluded contracts in the telecom (migration allowed to revenue-sharing model) and power sectors (compensatory tariff over and above quoted tariffs in the power purchase agreements allowed by the Central Electricity Regulatory Commission for Adani Power and Tata Power for their Mundra projects due to change in Indonesian coal law). Such exceptional circumstances, Singh said, prevailed in the road sector right now, calling for ?bold decisions? by the government to address the crisis.
* NHAI has proposed that the relevant concession agreements can be revisited to give these projects’ liquidity-starved developers the flexibility to reschedule premium payments
* It said the potential cancellation of 21 projects and the debarment of the developers could jeopardise the Public-Private Partnership model in the road sector