Stalled road projects to get new life as land requirement eased to 80%

Banks were insisting on 100% land availability before disbursal of loans

With as many as 30 national highway projects worth around R45,000 crore stalled due to difficulties in achieving financial closure, the government has removed the main hurdle by reducing the land requirement to 80% from the earlier 100% for banks to start disbursing loans to road projects.

The breather will immediately benefit 30 road projects which could not achieve financial closure though the stipulated period of 180 days had expired as banks were insisting on 100% land availability before disbursal of loans. New projects can also avail this benefit.

This easing of norms comes after the National Highways Authority of India (NHAI) took up the matter with the ministries of finance and roads on getting representations from the developers about the difficulties in getting loans. The NHAI contended that the banks need not worry about the developers repaying the loans with a lower land requirement as the rules allow collection of toll fee even after completion of 75% of the project. According to the rules, NHAI has to acquire the land and hand it over to the developer before the given date.

Following inter-ministerial consultations, the department of financial services ? in an internal communication to the chiefs of public sector banks and that of the India Infrastructure Finance ? also said in case any of these 30 projects included a by-pass alignment, the 80% land requirement will not include the land for the by-pass.

However, the notification specified that ?in case of new alignment (does not mean a new project, but only a change in alignment of an existing project) including by-pass, 100% of road portion needs to be in physical possession of NHAI before the appointed date? for disbursal of loans.

The sources said that the 100% land requirement was made mandatory following complaints that banks were disbursing loans even when the minimum requirement of 80% land was not met while disbursing loans. This, in turn, led to an increase in bad loans. ?The relaxation in norms is only a practical solution for the completion of these 30-odd projects. However, in all new projects, they should have 100% land,? an official said.

NHAI chairman RP Singh told FE that ?it (the relaxation) will help the developers to start construction on these stalled 30 projects?. ?Though NHAI continues to try and get 100% of the land before the appointed date, given the problems in land acquisition, projects should not be stalled just to meet this requirement. Eighty percent is good enough as the acquisition process continues during the construction period. We make all efforts to quickly acquire the remaining 20% of the land and transfer it to the developer,? he added.

M Murali, director-general, National Highway Builders Federation, said, ?Getting 100% land is practically impossible in the current scenario. The easing would not only help the developers in completing the projects and getting their money back, but also benefit the government.?

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First published on: 03-06-2013 at 20:19 IST