The Highway Ministry, while favouring a proposal to restructure premium paid by developers to the National Highways Authority of India (NHAI), has put in a few caveats.

In the tweaked proposal, the Ministry has suggested that the premium paid by a developer during the initial years cannot be lower than the toll revenue collected from that highway stretch. “The developer cannot use toll revenues to widen the highway,” said a source.

Premium is the amount offered by a developer to NHAI for the right to invest in widening a highway and collecting tolls from users of that stretch over a 20-30 year period. The annual premium offered was the bidding parameter for these developers.

Now, with changed economic conditions, many developers want to postpone the premium payment, which is termed as rescheduling of premium. The developers want to pay a lower amount in the initial years and a higher amount thereafter, while keeping the net present value of the premium constant.

So, as per the tweaked proposal, in the Kishangarh-Udaipur-Ahmedabad (KUA) case, where GMR is the highway developer, the annual premium cannot be lower than about Rs 400 crore, which is the level of annual toll revenue to be collected by the infrastructure major. In four-to-six-lane development projects, the developer collects toll from the time it starts widening the project. While no official confirmation was available, sources indicated that there had been discussions with developers, including GMR, on the issue, and the proposal was acceptable.

In the original premium rescheduling proposal, which was approved by the NHAI board, GMR had suggested that it would pay a very low level of premium in the first year of operations.

Another point is that the interest rate at which the net present value of premium is calculated will be linked to the Reserve Bank of India’s bank rate over the 20-30 year period. At present, the fate of this proposal – which will be sent to the Committee of Secretaries – is not clear. The Law Ministry has been opposed to any rescheduling of premium.

However, after this, NHAI Chairman R. P Singh sought “high level” intervention and an “informed decision” on the issue. He noted that not permitting rescheduling may jeopardise Rs 98,000 crore of potential premium committed by highway developers to the Government over the next 20-30 years, apart from leading to disputes.