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The Centre has allowed road developers to completely exit BOT (build-operate-transfer) projects two years after completion and invest the funds in incomplete highway projects, power plants or retire debt.
The Cabinet Committee on Economic Affairs (CCEA) on Wednesday gave its nod to expand the end-use of the divested equity proceeds of completed road projects.
This move, which comes three months after the Centre eased exit norms for completed projects, is expected to particularly benefit developers who have multiple verticals in the infrastructure sector.
In May, the CCEA had approved a comprehensive exit policy framework that allowed developers to divest 100 per cent equity two years after completion of construction.
No ‘year’ constraint While the May decision allowed this facility for pre-2009 projects, the government has now said that the exit facility will be available for all BOT projects, “irrespective of the year of award”.
With the latest decision, highway developers can use the divested equity proceeds in non-NHAI (National Highway Authority of India) projects or in power projects.
Also, the proceeds can be used to reduce their existing corporate debt to financial institutions in any other infrastructure projects. This decision will help unlock equity from completed BOT projects, making it potentially available for investment in all infrastructure projects, and not highway projects alone, said economy watchers.
This will result in physical completion of languishing infrastructure projects, an official release said.
The main objective of the decision is to expedite award and implementation of highway projects by making additional funds available for investment. As of May, 80 pre-2009 BOT projects were completed. The equity locked up in these projects worked out to around ₹4,500 crore.
The CCEA decision in May was expected to give a push to mergers and acquisitions in the road sector. Companies such as Ashoka Buildcon, IRB Infrastructure, ITNL, L&T IDPL, GMR, IVRCL and Reliance Infrastructure have projects pre-dating 2009.
The latest decision is expected to pave the way for more domestic and foreign funds to come into the road sector.
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