Thursday, Nov 27, 2014

Roads ministry working on norms to renegotiate stalled projects

Written by Mihir Mishra | New Delhi | Posted: February 10, 2014 3:24 am

In an attempt to avoid delays in the future, the road transport ministry is working on norms for renegotiating troubled road projects. These norms will be defined by adding a new chapter in the existing model concession agreement (MCA) for road projects.

“The new chapter will essentially define norms that would trigger any kind of renegotiation on projects awarded on public private partnership (PPP) in the future. These procedures will essentially define the eligibility for renegotiations and will ensure that we do not end up wasting a lot of time in deciding the eligibility for renegotiations of troubled projects,” said a senior road transport ministry official, who did not want to be identified.

The official added that the existing MCA does not define a troubled project. “The new chapter will have a check list kind of an institutional framework to identify a troubled project. We will ensure that it includes all eventualities and simplify decision making,” he added.

The National Highways Authority of India (NHAI) and road transport ministry, along with various other decision-making wings of the government, were discussing at various levels to provide relaxation to 48 projects that were awarded on premium.

It took around over 18 months for the various wings to reach on a mutually-agreed relaxation in terms of premium payment for the troubled projects.

A large number of these projects were awarded on premium during FY2011, when the economy was on a growth trajectory, but got into trouble after the economy slowed down.

In a project awarded on premium, the road developer develops the road and also commits an annual payment to the government during the concession period that is as high as 27 years.

The project that triggered the need for a support from the government was 555-km Kishangarh-Udaipur-Ahmedabad road project, where GMR Infrastructure, the developer, pulled out citing delays in approvals from the government as the reason behind the project becoming unviable.

The company had fetched the project with a premium commitment of Rs 663 crore annually over a total project cost of Rs 6,000 crore.

After various levels of discussions, the C Rangarajan Committee, formed by the Union Cabinet to suggest ways to revive stuck roads projects awarded on premium, recommended that the premium reschedule for projects should happen only if the toll revenues collected at a particular project is not enough to meet the annual cost.

The cost for a project, awarded on premium, includes committed premium payment to the government, operations and maintenance cost and debt servicing cost.

These recommendations would now require approval from the road transport minister Oscar Fernandes and finance minister P Chidambaram.

comments powered by Disqus
Featured ad: Discount Shopping