Union Minister for roads and highways, Nitin Gadkari on Friday met a gathering of top bankers in Mumbai, the deputy governor of the Reserve Bank of India and chairman, Life Insurance Corporation, to urge them to finance road projects.
After the meeting, Gadkari told reporters there are two categories of projects, one prior to 2014 and the other bid out after 2014.
Terming the discussions with bankers as excellent, Gadkari said for projects after 2014, the government’s policy of ensuring 80% of the land is acquired before they are awarded has ensured that few of them are stuck for want of funds.
However, for projects before 2014, Gadkari said, “We will need to evaluate these on a case-to-case basis. I have assured the bankers and the RBI deputy governor, the government will do all that is required to remove the obstacles from our side if there are any. All stakeholders — banks, the government and the National Highways Authority of India (NHAI) — need to discuss all issues together on a common platform”.
The minister added that 56 road projects, that are awaiting financial closure, should be able to procure finance sooner rather than later. According to Kotak Institutional Equities, the key risk is from 30-40% of the order backlog of road projects under the hybrid annuity model (HAM) that are yet to achieve financial closure.
Kotak said it notes the risk to financial closures of projects, based on the limited ability of companies to scale up operations and also due to lending constraints, accelerated by underwriting restrictions on banks under Prompt Corrective Action (PCA).