Government to bridge road projects' funding gap

Q: The Cabinet Committee of Economic Affairs decided to extend a one-time order for funds infusion by NHAI into such under-construction build, operate and transfer or BOT (toll) highway projects announced earlier to stranded BOT (annuity) projects also.

Pranab Malakar,

16th October 2015

Real estate News in Mumbai

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Replies (3)

Hi everybdy,
The government has also launched an advance hybrid annuity structure, under which NHAI will fund 40% of the project costs, reducing the developers' risks further.

With 11500 km of highway projects awarded since the start of last financial year, construction, which has picked up of late, is bound to speed up in the coming months.

Kishore Pathak, Mumbai

16th October 2015

Comment

Hi Kishore,
The fund distribution is subject to the condition that after completion of construction of such projects, loans are to be recovered along with interest at the rate of bank rate plus 2% by NHAI from the annuities payable, bi-annually, through execution of a tripartite agreement among the senior lender, concessionaire and the authority. All such cases and the amount of bridge fund required in each case shall be approved by the authority, on a case-to-case basis.

Vineet Tendulkar, Mumbai

17th October 2015

Right Vineet,
And at the same time, it is found that 18 road projects with a length of over 2000 km seemed eligible for the NHAI loan that will carry an interest of 9.75% (bank rate plus 2%). Of these, some 3-4 projects are in the BOT (annuity) category while the rest are toll projects.

satyajit dutta, Kolkata

16th October 2015

Comment

But now projects that had remained in uncertain state since November 1 last year are eligible to apply for the NHAI loan.

The funds movement would be started after a tripartite agreement is reached between NHAI, the concessionaire and the senior lenders given that NHAI will have the 1st charge on the receivables (toll/annuity) once these projects are completed.

Soundarya G S, Bangalore

16th October 2015

Thanks to Modi Govt.......The new network is the latest in a series of steps being taken by the Modi government to speed-up highway construction and reach its target to build 30 km of roads a day. Developers can easily unlock equity from completed projects. This recent policy decision allowing them take up 100% equity 2 yrs after completion of construction.

satyajit dutta, Kolkata

16th October 2015

But as per the current news, several belts of national highway projects that are at least half built but are slugging for need of funds could soon be bring around, with the National Highways Authority of India which providing them "bridge funds" for completion.

satyajit dutta, Kolkata

16th October 2015

Comment

@Satyajit,
A recent Crisil report has said that under-construction highway projects with a length of 3520 km and sanctioned debt of Rs 33050 crore are faced with ''high implementation risks'' due to sufficient time and cost overruns.

Vineet Tendulkar, Mumbai

16th October 2015