Easy exit for road developers ahead

November 5, 2012

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To tide over the lull in the highway sector — development of which has slowed down considerably this fiscal — the road ministry is considering a proposal to allow developers to exit immediately after its completion. This is expected to help developers free up equity locked up in completed projects.

Presently, developers who have taken up highway projects on built-operate-transfer (BOT) mode after 2009, are allowed to exit a project two years after its completion. For projects awarded before 2009, developers do not have an exit option.

“We are moving a cabinet note in this regard,” said road secretary AK Upadhyay.

Once a developer exits the project, the ministry proposes to transfer equity and ownership of the project to new players.

As against 7,957 km of projects awarded in 2011-12, till September this year, the National Highways Authority of India (NHAI) has managed to award a little over a 600-km- stretch of highway projects. Developers are citing non-availability of equity to invest in fresh projects.

“Many of them have committed their available equity for ongoing projects and are finding it difficult to raise fresh resources,” said a NHAI official.

In August, RP Singh, the NHAI chairman, had also written to the road secretary to liberalise the policy for equity dilution in completed projects.

Apart from helping reduce the loan liability of developers and allowing them to invest in new projects, the proposal, if approved, will also open up the sector to many foreign as well as domestic investors interested in taking up the operation and maintenance of completed highway projects, according to M Murali, director general, National Highway Builders Federation.

source: http://www.hindustantimes.com