The NHAI’s move comes in the backdrop of road developers rejecting the conditions put forward by the Finance Ministry for allowing postponement of premium payment for highway projects that are currently stalled.

CANCEL PROJECTS

Instead of having a solution that is unworkable, it would be better to foreclose these projects amicably and re-bid rather than waste time in trying to revive these projects, said R. P. Singh, NHAI Chairman, in a letter last week to Vijay Chhibber, the Road Ministry Secretary. Singh suggested that the Ministry may form a committee to deal with developers.

According to an official source, the Road Ministry, in a proposal for the Unions Cabinet’s consideration, has suggested various options for rescheduling the premium, including cancelling the projects.

NO MORAL HAZARD

The Chairman also objected to the use of the term “moral hazard” by the Department of Economic Affairs (DEA) in reference to the proposal for rescheduling premium.

“Use of lexicon such as moral hazard, penalty, haircut, convey the impression that we are doing something out of the way for the concessionaires (developers). On the contrary, NHAI is trying to salvage contracts, which are in our favour,” Singh has said.

The Finance Ministry, while using these terms for the proposal, had supported one-time renegotiation, subject to from the Law Ministry as well as imposition of penalties.

The NHAI Chairman suggested that instead of financial penalties, the Government could use this opportunity to impose more stringent conditions, which would help the public and prevent developers from raising further financial claims against NHAI.

These conditions include stopping developers from charging toll for four-to-six projects in case they do not meet project milestones. Similarly, developers who seek such premium rescheduling, can be asked to commit that they will not raise any claims on account of any delays by NHAI in getting regulatory clearances.

At stake are several highway development projects awarded about three years back , which had committed a premium of over Rs 90,000 crore to be paid to the Government over 20-30 years.

The premium offered had a net present value of about Rs 26,000 crore.

Due to the slowdown, many developers, who had won highway development projects two to three years ago promising high premium, are now unable to implement the projects.

To continue operating the projects, the developers now want to postpone their premium payment in a manner that its net present value (NPV) is unchanged.

Premium is the amount offered by a highway developer to NHAI in exchange for the right to develop, maintain and collect toll from a highway for 20-30 years. The amount, which is payable every year, is arrived at through competitive bidding.

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