Government plans to give some concessions to financially strained highway project developers in order to fast-track execution of projects in the sector.
It may be noted that the NHAI has been able to award contracts to build under 1,000 km of highways so far in 2012-13 compared to the revised target of 4,800 km in the entire financial year.
Originally, PMO had set a target of 9,500 km, twice the revised level. The reason for slow pace of award of road project is the declining interest among developers for new projects. In this context, the government is considering to offer bailout package for developers.
As part of the package, National Highways Authority of India (NHAI) is looking at allowing a staggered payment which will allow developers to pay a lower upfront premium this year and instead postpone a part of the amount during the latter part of the contract period to make the projects viable.
They were among a group of developers who quoted hefty premium – which assured annual upfront payment to government that increases 5 percent every year during the contract period that can extend to 30 years.
The government also considers to allow 100 percent dilution of equity of developers in projects which have already been completed and tolling has started. NHAI has been pushing for this in case of all completed projects after it held several rounds of talks with the highway developers.
This will infuse more equity into the sector, enabling developers to get funds to start the projects. The proposal is, however, facing resistance from the Planning Commission and the expenditure department.