Roads ministry make changes in exit policy for project developers

Q: Have you heard the news today that the roads ministry is reworking a proposal to provide an early exit to project developers after an earlier cabinet note was returned by the Prime Minister's Office, mentioning reservations.

Amreesh Murugan,

16th October 2014

Real estate News

road projects

road ministry

exit policy for developers

economic slowdown

Follow Discussion

Also see discussions for

Real estate News

Replies (7)

Well Akash,
But the road developers have been long demanding a change in the exit policy, maintaining this could free up equity for future projects. In the current climate, the valuation of road projects will be in the lower side, so even if a concessionaire wants to exit a project, he might not get the right valuation.

Tushar Surendren, Delhi

17th November 2014

Comment

That is why the private sector developers have been staying away from road projects due to insufficient funding and land acquisition concerns, forcing the government to scrap awards on PPP this year. The ministry has now decided to award projects on the government-funded route.

Akash Kanojia, Delhi

17th November 2014

Hi all,
This is not a new story even in January'2014 Road Ministry allow road developers to free up capital and speed up execution of delayed projects, the road ministry is set to modify its exit policy and make it easier for new investors to enter and replace existing ones.

Tushar Surendren, Delhi

17th November 2014

Comment

You are right Tushar,
The government had approved a new exit policy for highway projects in June 2013 that relaxed the exit norms by allowing concessionaires to exit both ongoing and completed highway projects. Earlier, a concessionaire could exit only two years after the start of commercial operations for contracts awarded after 2009. For projects awarded before 2009, a complete exit was not allowed.

Akash Kanojia, Delhi

17th November 2014

@ Santosh,
It is also notable that as many as 20 road projects worth nearly Rs.27000 crore failed to get bids from the private sector over the last two financial year.

Pranab Malakar,

16th October 2014

Comment

Hi all,
It is come to our knowledge that the ministry of road transport and highways has been able to achieve only one-fourth of the target for road project awards in the first half of the current fiscal year. The roads ministry awarded just 2,150km as on 30 September against a target of 8500 km for this fiscal, according to two government officials who requested anonymity.

Pranab Malakar,

16th October 2014

Comment

Well Pranab,
A senior road ministry official said that conversion of projects from PPP to EPC model is taking time. About 3500 km of projects are under PPP model, which will first have to be put out for bids and if they fail to get any response, will have to be converted into EPC.

Santosh TR,

16th October 2014

@Santosh,
It is because the most road developers had bid for projects based on these forecast but the drop in traffic numbers affected the viability of the projects. The industry has since been demanding a bailout from the government, and reliefing the exit policy is one of the key steps being considered by the roads ministry to allow harass developers to exit.

Pranab Malakar,

16th October 2014

Comment

Do you know because of this issue the Indian economy slowed to 4.7% in the financial year ended March after growing at over 9% for three financial years from 2006 to 2008.

Santosh TR,

16th October 2014

Hi Santosh,
This news tells us that the roads ministry, in a cabinet note moved in August, had attempt to find a change in the existing exit policy to allow dealer of ongoing or completed road projects to exit completely at any stage by selling their stakes.

Pranab Malakar,

16th October 2014

Comment

@Pranab,
The exit policy for road projects has accept importance because the recent economic slowdown led to a fall in traffic numbers, affecting revenue forecast from tolling road projects over the last 2 years.

Santosh TR,

16th October 2014

Yeh,
You are right Amreesh. Even the ministry is likely to put out a rectified draft for comments from other ministries in a week.

Santosh TR,

16th October 2014

Comment