The National Highways Authority of India (NHAI) may provide some relief to the Infrastructure Leasing & Financial Services (IL&FS) group in order to ease the liquidity crunch faced by the company and enable it to complete projects. IL&FS group companies have been awarded contracts for key infra projects, which are now stalled due to the fund crunch at the group. These projects include the Rs 5,000 crore worth of Zojila tunnel and Z-Morh tunnel near Sonmarg in Jammu and Kashmir, and a number road and other projects across the country (see chart).
A director with the former board of the IL&FS group told The Indian Express that of the IL&FS group’s total receivables, it has payment dues of around Rs 15,000-16,000 crore from the NHAI. “Usually, NHAI does not make payments unless 100 per cent of the work is completed,” the official said. Government sources said the NHAI may provide partial relief to the company by making some payments for portion of completed projects after an independent evaluation at the ground level.
Road transport and highways minister Nitin Gadkari said on Friday the government is open to suggestions from the new management of IL&FS to revive its infrastructure schemes. “It is not our work to stall road projects. Our work is to complete projects in time within the ambit of rules and regulations. If any company or any contractor, facing obstacles comes we will try to find out a solution,” Gadkari said on the sidelines of India-Russia Business summit Friday, as per a PTI report.
IL&FS secured the construction, operation and maintenance contract of the 14-km long two-lane bi-directional Zojila Tunnel with Parallel Escape (Egress) Tunnel, to be built over seven years and involving an estimated cost of Rs 4,899 Crore. On May 19, 2018, Prime Minister Narendra Modi laid the foundation stone for this project, which the company pegged as the longest road tunnel in Southeast Asia. Apart from this project, the group’s many other projects are facing financial difficulties and need funding support for timely completion.
“Three of the company’s projects, namely the Fagne-Songadh and Amravati-Chikli road projects and the Srinagar Sonamarg Tunnel project are awaiting financial closure even after three years. As a consequence, the funding has been partly done by the Company with the IL&FS Group’s support and through bill discounting facilities that has further strained cash flows,” IL&FS Transportation Networks noted in its annual report for 2017-18. Lack of equity funding for projects such as Ranchi Ring Road has also delayed drawdown of loans sanctioned by the lenders, which has hampered progress. Other projects Kiratpur Ner Chowk, Khed Sinnar and Barwa Adda are stalled due to delay in land acquisition and bankers refusal to fund these.
On Monday, the government appointed a six-member board led by Kotak Mahindra Bank Managing Director Uday Kotak to takeover the management of IL&FS following an order by the National Company Law Tribunal’s Mumbai bench. The supersession of the board was the necessary first step towards restoring the confidence of the financial market in the IL&FS Group, the government had said. After the first meeting of the new board Thursday, Kotak said: “We’re evaluating options to ensure that the fair value of the asset and the enterprise is preserved to the maximum extent that we can do and find a fair resolution mechanism.” IL&FS group has a total debt of around Rs 91,000 crore and it has to repay around Rs 2,500 crore to banks and debt paper holders by March 31, 2019. The company has been defaulting on its repayments in recent weeks, creating a scare in the financial markets.