The Law Ministry has now said that the Finance Ministry should take a call on a proposal to allow highway developers to postpone payment of premium in order implement road development projects.

Premium is the amount offered by a highway developer to the NHAI for the right to develop and operate a highway for 20-30 years. Premium, which is payable every year, is arrived through a competitive bidding process.

PROPOSAL

With the slowdown setting in, many highway developers who had won projects two-three years ago promising high premium, are now unable and unwilling to implement the projects. To continue building the highway, they want to postpone their premium payments in a manner that the net present value of the premium is not changed. Otherwise, the road sector regulator faces the chance of many developers backing out from projects, or having to cancel and re-invite bids.

Earlier, the Law Ministry had shot down the proposal to permit rescheduling. Subsequently, the NHAI Chairman R.P. Singh wrote a letter to the PMO and Ministers, including Law, requesting for a “top level” intervention on the issue, as the move was one of the steps to revive the road development sector.

The Chairman had explained that the proposal neither adversely impacted the net revenue implication for the NHAI over the contract period of the project, nor did it result in any “material enhancement” of returns to developers.

He had added that the proposal was simply an attempt to help the developer manage his cash payment better in the early years of the contract period to prevent road projects from falling into a liquidity trap.

> mamuni.das@thehindu.co.in

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