By the end of 2012-13, thirteen projects at a total project cost of Rs16,000 crore received no financial bids, though some of them were put on the block more than once. This financial year, infrastructure companies gave three annuity-based projects worth Rs1,900 crore a miss despite the government assuring payment in such a model. In all, National Highways Authority of India was able to award projects covering 1,116 km in 2012-13, while 1822 km got no bids. “It is very clear especially if you see that even annuity projects did not get a response, that there is a total lack of equity in the market,” said RP Singh, chairman of National Highways Authority of India.

“Unless our two proposals on easier exit options for concessionaires and back-loading of premium are agreed to, it will be very hard to go ahead with BOT projects in the sector,” he cautioned. The beginning of the year saw infrastructure majors GMRBSE -0.47 % and GVK walk out of mega-projects worth over Rs10,000 crore. National Highways Authority of India officials said Ashoka Buildcon has also sent a notice seeking termination of its Rs1,100 crore project in Odisha. While the companies have cited regulatory and clearance issues, the highways authority says companies are backing out as they are facing severe financial stress. “The industry has seen the effects of aggressive bidding in 2010-11 and 2011-12 that lead to problems with financial closure.

NHAI has also not been able to provide the clearances required and there is a policy lacunae going on that has made investors cautious,” said an official of a prominent infrastructure firm that was selected in the pre-qualification rounds in many of the 17 projects. “The clampdown on mining in states like Karnataka and Orissa has also affected viability of projects in those areas because of the sharp decline in mining traffic,” he added. Two projects in Karnataka worth close to Rs2000 crore and three projects in Odisha including the Chandikhole to Paradeep and Chandikole to Talcher stretches saw no interest despite the fact they were offered a few times.

“Regulations on exit options have been difficult, capital for many companies is blocked in existing projects and policy issues like land availability are the reasons why interest has waned in highway projects off-late. Earlier people used to take a risk even with land availability issues, but that confidence has gone away because of which companies have also stopped implementing projects,” said Sunil Kanoria, vice-chairman, Srei InfrastructureBSE 1.73 %. The highways ministry is currently drafting a revised note for the Cabinet on allowing companies to divest 100% of their equity in existing projects as well as easier norms of substitution of concessionaires.

If approved, this could free up equity from existing projects, which could be invested in new projects. The ministry is also working on the deferral of premium payment by companies like GMR. About 25 companies with premium of Rs97,000 crore are facing financial stress and could be interested in this option, according to National Highways Authority of India