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National Highways Builders Federation seek financial relief

Venkatesh Ganesh Mumbai | Updated on April 20, 2020

National Highways Builders Federation (NHBF) has written to the government urging it to provide financial relief to concessionares and EPC contractors in the backdrop of a lockdown due to Covid-19.

The relief will help the concessionaires in paying staff salaries and other expenses incurred. With the Covid-19 outbreak, the entire highway industry is a complete standstill with a cascading effect on project concessionaires or contractors who have invested huge amounts in the projects, NHBH wrote in a note addressing S S Sandhu, Chairman of NHAI.

The issue on hand related to the lockdown (which started on March 24, which has been extended till May 3. During the lockdown period, the concessionaires have not collected any revenues from toll collection as per NHAI's instructions. The government has declared lockdown as a force majeure event for road developers.

However, fixed costs such as staff salaries, emergency services and expenses incurred on operation and maintenance is continued to be incurred by the concessionaires and that is not covered under force majeure clause.

"There are projects where the contractors do not have adequate funds to pay salary either from toll revenues. The funds held in withheld accounts can be released for this purpose with an automated mandated payment process to reduce processing time," said NHBF. Further NHAI needs to compensate concessionaires adequately for the lockdown period till the revenue and traffic gets back to January 2020 level, it said. NHBF reasoned that performance on projects will be impacted longer beyond lifting of official lockdown dates.

Apart from revenue compensation, NHBF also wants pending decisions such as grant of Extension of time (for projects). Additionally, to ensure sustainability of ongoing projects and to prevent lenders dent becoming NPA, Ministry of Road Transport and Highways (MoRTH) needs to direct RBI to permit restructuring or rescheduling of loans as one-time measure for all Special Purpose Vehicles (SPVs). Infrastructure projects are generally executed through SPVs.

NHBF has also sought quick settlement of cases which are under arbitration. Release of funds held up in the arbitration process will help in bringing liquidity in the market," it said. NHBF has also suggested the use of audio or video conferencing to expedite the arbitration process in the next few months, without adjournment. Further, conciliation proceedings should be concluded in a maximum of 3 sittings without any adjournments. On December 2019, national highway projects worth Rs 5.85 lakh crore were underway under various models such as Build Operate Transfer model (BOT) and Hybrid Annuity Model (HAM).

Published on April 20, 2020

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