Nitin Gadkari cracks whip, tells banks to fall in line, step up financing for HAM projects

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Mumbai | Published: September 19, 2017 6:10:04 AM

Over the last two years, projects awarded under HAM have become the most preferred mode of awarding projects by the NHAI with 53% of awards in FY17 done under this route, up from 8% in FY16.

In a direct message to bankers, Nitin Gadkari, Union minister for road transport and highways, on Monday said the Centre would award projects through the engineering, procurement and construction (EPC) mode if banks do not quickly address the issue of financial closure for road projects that have been awarded to the private sector. (PTI)

In a direct message to bankers, Nitin Gadkari, Union minister for road transport and highways, on Monday said the Centre would award projects through the engineering, procurement and construction (EPC) mode if banks do not quickly address the issue of financial closure for road projects that have been awarded to the private sector. “Financial closure for road projects awarded under the hybrid annuity model (HAM) is still taking as long as 14-16 months. My suggestion is these decisions should be taken faster. Otherwise, we do not have any problem. We are financially strong and we will tender the projects on the EPC mode,” Gadkari said. He emphasised that the projects under HAM are secure, sound projects and that bankers should have no hesitation in financing them. He pointed out that over the last three years, stalled projects worth Rs 3,85,000 crore have been cleared and bankers should now begin to change their mindset and their apprehensions of old.

Over the last two years, projects awarded under HAM have become the most preferred mode of awarding projects by the NHAI with 53% of awards in FY17 done under this route, up from 8% in FY16. According to latest data available (till March 2017) from Icra, a total of 43 projects, covering 2,641 km were awarded through HAM (34 in FY17 and 9 in Q4FY16). However, given the low equity requirement under this model, lenders are concerned about the developers’ commitment to the project till the end of the concession period, particularly because many of them have limited experience. Many tier-II developers have won HAM projects and therefore, a sizeable number of projects are struggling to achieve financial closure (especially the ones under the less reputed developers). Gadkari added that the ministry may consider listing NHAI on the bourses in the future. He said listing NHAI could unlock a value of about Rs 10 lakh crore for the government but that an approval from the finance ministry is required. He also said the first package under the toll-operate-transfer (TOT) model could be put up for bidding in October.

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