As a meeting in New Delhi between the government, lenders and concessionaires on Thursday could not find solutions to 10 of the 19 languishing highway projects, the road ministry is likely to restructure and rebid them. Work on these 10 projects, awarded long ago, has not yet started on the ground.
The remaining projects, where further development is possible, will be completed with additional funds from the lenders, even as in the case of many of them, banks have already over-exposed themselves. One-time fund infusion by the National Highways Authority of India (NHAI) is also possible, as approved by the Cabinet, in these projects, though no final decision has been arrived at, sources attended the meeting told FE.
Banks including State Bank of India and Punjab National Bank have R21,014 crore of exposure in these 19 projects, having a total length of 1,626.62 Km spread across various states. The meeting, attended by finance minister Arun Jaitley and road transport minister Nitin Gadkari, among others, was convened to take a look on the revival possibility of these projects.
Sources said banks’ exposure would take a hit in the proposed-to-be-terminated projects, but Jaitley told bankers not to turn their faces away from the “happening” road sector as it has the potential to push the economy along with other triggers such as private investment, FDI and domestic demand.
Banks have been wary on lending further to the road sector, plagued by a host of issues including large NPAs and sectoral exposure ceilings. The roads sector is responsible for the second highest NPAs to the banking system after steel. The onus goes on to the banks as well, as in many cases they have lent much excess than what NHAI had assessed the cost of these projects. In each case, the banks had projected a toll stream from these projects and lent on the basis of a discounted cash flow. With the revenues not materialising, however, these projects soon ran into all manner of trouble.
Sources also said that no final decision on the bankers’ demand of a pari passu charge on tolls from these highways has been taken in the meeting on NHAI’s one-time fund infusion. While NHAI was demanding that it was to get first charge on the toll from the expressways, banks have asked for a pari passu charge.
Of the 73 languishing highway projects, awarded mostly between 2010 and 2012, with a total length of 8,310 km, the government has already terminated 39 projects having a total length of 4,617 km. According to Crisil, around 40% of completed build–operate–transfer (BOT) projects are in danger of defaulting due to low toll collections. In FY16, Crisil estimated these roads required a toll growth of 37% against a likely 10% or so. These roads, which account for around 40% of all BOT roads, have an outstanding debt of Rs 17,200 crore.