CCEA may take up premium recast of highway projects on Sept 20

September 19, 2013

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By PTI |

(Road Ministry’s proposal, to be taken up by the CCEA, suggests that companies can pay less premium in initial 2-3 years and the remaining amount in subsequent years.)

NEW DELHI: The government is likely to consider a proposal on Friday for restructuring of premium payment for companies building highway projects.At present, companies pay some amount of premium to the government in the first year of the project which keeps on increasing in the subsequent years.

According to sources, the Road Ministry’s proposal, which would be taken up by the Cabinet Committee on Economic Affairs, suggests that companies can pay less premium in initial 2-3 years and the remaining amount in subsequent years.

There will be no change in the value of the premium but companies can pay lesser amount initially, which is like a breather for the firms, sources said.

The Cabinet note for the proposal was circulated by the Ministry of Road Transport and Highways last month.

The move was proposed against the backdrop of some private infratstructure firms pulling out of road projects due to delays in regulatory clearances like land acquisition and environment clearances.

These problems had delayed the projects and affected the companies’ financials.

Earlier this year some private companies even terminated their contracts with the National Highways Authority of India ( NHAI) citing these reasons.

Therefore, in order to relieve the companies facing financial stress the Road Ministry proposed the idea of recasting the premium payment of the projects.

The ministry is also believed to have suggested that the restructured premium for any year should not be lower than the toll collected by the developer for that year and the developer cannot pull out from the project till all dues to the government are paid.

Source-http://economictimes.indiatimes.com