Road ministry takes steps to boost developers’ liquidity

According to a MoRTH notification issued on Tuesday, hybrid annuity model (HAM) and engineering procurement & construction (EPC) contractors will continue to get monthly payments for their work done for three more months till March.

As per the concession agreement, the loss in collection of user fee is compensated by extending the concession period till the time daily collection is below 90% of the average daily fee.

With the third Covid-19 wave looming large, the ministry of road transport and highways (MoRTH) has extended relief measures to contractors and developers of national highways to improve their liquidity.

According to a MoRTH notification issued on Tuesday, hybrid annuity model (HAM) and engineering procurement & construction (EPC) contractors will continue to get monthly payments for their work done for three more months till March.

“ln case of build-operate-transfer (BOT)/ toll-operate-transfer (TOT) concessionaire, for reduction in collection of user fee, the concession period is to be extended as per provisions in the concession agreement,” the notification said.

As per the concession agreement, the loss in collection of user fee is compensated by extending the concession period till the time daily collection is below 90% of the average daily fee.

“For all national highway tolling contracts, reduction in collection of fees may be compensated in accordance with the user fee collection contracts,” the ministry said.

Extension of time will be granted to concessionaire for achievement of financial closure in the concession agreements entered between April-June 2021 for a period of one month from the due dates, as per provisions of the contract, depending on the location of the project.

The ministry has directed all implementing agencies, including the National Highways Authority of India, to make direct payments to approved sub-contractors through escrow accounts.

MoRTH has already decided to reduce performance security from existing 5-10% to 3% of the value of the contract for all existing contracts, barring those involved in arbitration. In the latest notification, it said all tenders or contracts issued or concluded till March 31, 2022 should have the provision of reduced performance security.

Since retention money is a part of the performance security till the construction period, the release of retention money may also be continued in proportion to the work already executed and no reduction of retention money may be made from the bills raised by the contractor till March 31.

“For HAM/BOT contracts, performance guarantee may be released on pro-rata basis, as provided in the contract, if concessionaire is not in breach of the contract,” the notification said.

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