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HighwaysMin open to road developers paying premium after construction

Road developers may not have to make premium payments during the construction period,as the road transport ministry is considering allowing them to start the payments only after a road project starts commercial operation

Written by Mihir Mishra | New Delhi | Published: April 4, 2013 1:46 am

Road developers may not have to make premium payments during the construction period,as the road transport ministry is considering allowing them to start the payments only after a road project starts commercial operation.

For projects awarded through the Build,Operate and Transfer (toll) premium,the developer will construct the road and also make annual payments to the government over the concession period.

A senior road transport ministry official said that the system of making a road developer pay premium during the construction period is flawed and needs to be revisited.

“The developers borrow money from banks to honour their premium payment schedule during the construction period and this is a flaw. Why should a developer borrow money to make premium payments during a period they should focus on construction?” said the official.

He added that any change in the premium payment schedule will require a change in the model concession agreement (MCA). Currently,a road developer has to start making payments from the day the company starts construction on the project.

If the proposal is cleared,the developer will start making premium payments after construction,which usually takes three years.

The National Highways Authority of India (NHAI) has written to the ministry saying that its board has cleared the proposal by GMR Infrastructure for staggered payment of premium to start work on the 555-km expressway project.

“During the initial years,the company wants an exemption from full payment of premium and wants to pay a part,which is their accruals from toll collection,” said the official.

The proposal was opposed by the secretary of the Planning Commission and the expenditure secretary,who are members of the NHAI board.

“We will,after incorporating our views and taking a legal view on the issue,forward it to the Cabinet for consideration. We are also very clear that whatever exemption government decides on will be for the sector and not for only one company,” said the official.

The solution will benefit around 20 projects,which were awarded on premium during the 2010-11 fiscal,that are facing problems in one way or the other.

PREMIUM BREATHER

* Currently road developers have to make premium payments — the share from future toll collections — to the government from the first day of construction,for which they borrow money

* The government is considering a proposal to allow them to start payments after the construction is complete

* If approved,the move would benefit around 20 road projects

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