Highlights of financing issues.

Thirty-one national highways projects have reached financial closure over the last three years amidst challenging financing environment, said Minister of State for Road Transportation and Highways Pon. Radhakrishnan in a written reply to a question in the Lok Sabha on 27 July 2017.

The projects are being implemented through Build Operate Transfer (BOT – Toll/Annuity), Hybrid Annuity model (HAM), Engineering Procurement & Construction (EPC) and Item rate.

Challenges faced by Ministry are achievement of financial closure within time limit, payment of premium by concessionaire on construction completion, shortage of equity with private developers, high cost of debt, stake holder demand for exit etc.

To manage these challenges, the Ministry has taken the following steps:

(i) Premium Deferment in stressed projects: Allowing restructuring of premiums committed by Concessionaires during the bid stage in projects which is renegotiable only once through the life of the Concession.

(ii) Harmonious Substitution in Financially stressed projects: Permitting substitution of existing Concessionaire or the selected bidder/consortium member of such project’s Special Purpose Vehicles in a harmonious manner.

(iii) One-time fund infusion to revive and physically complete languishing BOT projects: Provision of financial assistance in the form of a loan at bank rate +2% subject to first charge on the Toll/Annuity receivables of those projects which has achieved at least 50% physical completion.

(iv) 100% equity divestment after two years of construction completion for all BOT projects irrespective of year of award which facilitates concessionaires to invest in any other projects.

(v) Authorizing National Highway Authority of India (NHAI) for rationalized compensation to Concessionaires in case of delays not attributable to Concessionaires for languishing highway projects on BOT mode.

(vi) Securitization of future cash flows in BOT Projects: Granting of permission by NHAI to the Concessionaires of Public Private Partnership projects which have Tol/Annuity revenue significantly surplus to the repayment obligations to raise subordinate loan on the strength of future surplus cash flows of their operational BOT Road projects. fii-news.