Exit norms relaxed for road developers

In a push to reforms for the road sector,the Cabinet Committee on Economic Affairs (CCEA)

Written by ENS Economic Bureau | New Delhi | Published: June 22, 2013 2:41 am

In a push to reforms for the road sector,the Cabinet Committee on Economic Affairs (CCEA) cleared the exit policy or substitution of concessionaire for road developers,which allows them to exit a project right after the financial closure of the project.

“In view of the prevailing lack of interest among prospective bidders for highway projects under the PPP mode and difficulties faced in achieving financial closure for such projects awarded in the recent past in an already subdued investment climate,it has been decided that existing concessionaires both in case of completed and on-going projects be permitted to divest their equity in totality. This would bring about required flexibility for existing concessionaires in terms of exit options,” a release said.

According to the policy,the exit proposal can only be triggered by the contractor who plans to exit,and cannot be moved without the consent of the bank,which has provided funds for the project.

Under the current norms since November 2009,developers must hold at least 26 per cent of equity up to two years from the commercial operations date but there are no such provisions for projects awarded before 2009. This proposal will benefit build-operate-transfer projects that were awarded before 2009.

Industry does not expect much change but have called the policy a step in the right direction. “Lucrative road projects will find takers but the company’s may not want to sell it. On the other hand,projects with less cash flow will not find takers. It might look promising on paper but in reality it would not make much of a difference,” said a senior executive of a Mumbai-based infrastructure company.

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