Road developers may get more time to arrange funds

Mamuni Das New Delhi | Updated on January 25, 2013 Published on January 25, 2013

The NHAI plans to extend the time required for developers to achieve financial closure.   -  BusinessLine

Alarmed by the exodus of private road developers from highway projects, the Government is considering a slew of steps to salvage the sector.

The idea is to prevent developers from exiting projects citing regulatory delays, or policy changes, sources close to the development said.

In the short run, the National Highways Authority of India (NHAI) plans to extend the time required for developers to achieve financial closure.

This is in case there is a delay in getting the requisite Government clearances.


Moreover, In fiscal 2011-12, about 37 projects were awarded, and 34 are still awaiting financial closure.

Usually, project developers get 180 days, extendable by another 200 days, to achieve financial closure, after signing a concession agreement.

The Highways Ministry is also considering an option to streamline procedures at a basic level to help prevent projects from getting stuck at various clearance levels.

One option is to try and do away with the need to get approvals for cutting the trees planted on both sides of the road by the Highways Ministry.

“For widening roads in areas where trees have been planted by the National Highways Authority of India, tree-cutting clearance should not be required,” explained a source.

“The options being considered are more fundamental in nature that would have wider impact,” a Highway Ministry source said, declining to divulge further details.

Another option is to consider loans extended to highways sector as secured loans. At present, funds for the sector are considered as unsecured loans. Recently, the NHAI Chairman R.P. Singh stated that while banks can increase sectoral limits for highways sector, it would be difficult to push the unsecured loan limits.


The highways sector is the second largest in infrastructure segment, after power, to which banks have extended loans.

Meanwhile, developers are demanding that the Government should look at compensating the cost escalations due to delays in environment-related approvals, land acquisition, and State support agreements.

“The compensation could be monetary or further extensions in the concession period,” said M. Murali, Director-General, National Highways Builders Federation.


Favouring an intervention by the Government, Parvesh Minocha, Managing Director-Transport, Feedback Ventures, said: “Nobody, including the Government, anticipated the slowdown. The Government cannot shirk its responsibility to provide basic road services. Contracts need to be renegotiated. To do that transparently, a separate regulator may be created.”

In the current fiscal, the Government’s efforts at bidding out national highway projects have been unsuccessful.

Recently, firms such as GMR and GVK exited large highway projects citing delays in environment clearances and other policy changes.

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Published on January 25, 2013
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