By YASHODHARA DASGUPTA, ET Bureau

  

NEW DELHI: To revive India’s stuttering highway building efforts, the government may scrap several existing contracts that are making little progress on the ground. The road transport and highway ministry has asked the National Highways Authority of India to review all languishing projects and identify those that can be terminated on contractual grounds, so that they can be bid for all over again.The move comes in light of the fact that several projects awarded in recent years are either stranded midway or have been complete non-starters. The road ministry also wants the same clarity for those stalled projects that could benefit from deferral of premium payments.

It will re-circulate a Cabinet note on its proposal to allow financially stressed developers to defer payments of premia that they had committed to pay to win the highway projects. An additional option of cancelling the projects and re-bidding them would now be included in the note.

Road ministry officials said this note, which has been modified based on the finance minister P Chidambaram’s advice on the matter, will be sent to the Cabinet so that a final call can be taken at the highest level and the projects can finally start moving again.

“A clear decision needs to taken. We have asked NHAI to find out how many projects can be terminated. The decision on what to do for projects that fall under the premium restructuring case will be taken at the Cabinet level. But for the rest, we can decide on a course of action now,” said a senior road ministry official familiar with the issue, adding that NHAI has also been asked to determine which of the premium-based highway development project are indeed stressed and thus, deserve a bailout.

“We are studying around 35 highway projects of which 23 are premium-based (with premium of close to 1 lakh crore) and the rest are based on viability grant funding. We will basically divide the projects into four categories – projects where developers are ready to operate under the original parameters as long as we fulfill all our obligations, projects that should be terminated with penalty where the concessionaire has defaulted, projects which should be terminated without penalty where both the concessionaire and NHAI have failed to meet obligations, and those where developers are sitting on the fence and awaiting more clarity from the policy end,” said an NHAI official adding that the NHAI board will deliberate on this list in this in their upcoming board meeting on August 22.

The highway authority is reviewing whether these 35 contracts can be terminated either for developer default, NHAI default or both and the NHAI board will deliberate on this in their meeting later this week, the official said.

NHAI has been batting for the premium restructuring proposal that would allow developers in stalled projects to restructure their premium payment so that the financial stress is relieved. However, in May, the law ministry rejected it on grounds of legal and constitutional feasibility following which the road ministry referred the matter to the Committee of Secretaries (CoS) who did not support the proposal citing the law ministry’s objection. In July, after a fresh request from the road ministry, the law ministry backtracked on their previous advice and instead said the matter should be resolved between the finance and road ministries.

Earlier this month, the FM wrote to road minister Oscar Fernandes cautioning him of the ‘moral hazard’ in renegotiating contracts post-award and that the law ministry’s permission must be taken.

 

Source-http://economictimes.indiatimes.com