Cash Crunch

Still recovering from the ´zero toll´ period during the demonetisation rollout, many infra players are waiting for cash compensation from the government so that they can stay solvent.

The infrastructure industry is reeling from the after-effects of the demonetisation exercise launched in India to shed its old currency notes of Rs 1,000 and Rs 500 denominations.

The Union government was prompt to allay the fears of infra road developers (conc-essionaires) who were asked to defer toll collections for an interim period in November and December 2017, with a promise that they would be compensated for their losses of revenue suffered.

Predictably, the National Highway Builders´ Federation (NHBF) has been representing the cause of India´s road builders and seeking a fair compensation, taking into account not only the revenue losses due to the deferred toll, but also the adverse impact on O&M costs as well as interest and principal amount payments owed to banking institutions that were also adversely impacted by demonetisation.

An upset infra industry has been representing repeatedly to the Union government on the urgent need to clear the promised compensation at the earliest, on pain of pushing functional concessionaires over the brink, into the classification of non-performing assets on account of interest and principal payments outstanding towards banks following the deferred toll collections.

Says a well placed developer, on condition of anonymity, ´Adjustments were the key to tide over the demonetisation blues. While labour contractors are paid by cheque, the labour class had been receiving its emoluments in cash. The deferment of toll collections was a logical step, on pain of the long serpentine queues of truckers, cars, buses and other vehicles that would have otherwise bogged down the toll collection centres across India (due to the paucity of currency notes in the system).´

He added that out-of-the-box thinking was also the way many tackled the money crisis. ´Many contractors facilitated the retail purchases of their workers through direct payments to the stores on behalf of their workers, in lieu of their wages. Similarly, a big section of this informal workers´ class has now been enrolled into the banking system by other contractors. You must understand that the demonetisation exercise was launched as a (surprise) measure and solutions had to be found. We did our adjustments. Now it is the turn of the Union government to reciprocate, if it is interested in attracting private sector investments into the infrastructure building of the nation.´

The government for its part has been slow to address infra industry concerns through hard cash disbursements to compensate the toll concessionaires and keep them from lurching over from the category of functional assets to NPAs. NHBF has pointed out to the Union government that the ´zero toll´ phase in November and December 2016 had taken its toll on concessionaires that could only be alleviated by cash compensations being handed out by the government so that they could move back from the red to respectability levels with their banks on the issue of outstanding interest, debt servicing and O&M expenses.

The infra sector needs its cash, now!