It seems the stalled highway expansion programme of the country is about the get a much needed booster dose. A meeting convened by the prime minister's office today decided to take forward proposals of the NHAI on giving financial comfort to contractors of highway projects. However, the department of economic affairs could play spoilsport, report CNBC-TV18’s Rituparna Bhuyan and Elan Dutta.
This fiscal, the NHAI could award 1000 km of highway expansion projects against a target of 9,500 km as there were no takers. FY14 could see a revival of interest in highway projects with the PMO, planning commission, department of financial services and the roads ministry today agreeing on a set of proposals anchored by the highway regulator to revitalize roads development.
The key proposal that saw unanimous acceptance was on transfer of equity of highway projects. This will allow financially stressed contactors to hand over highway projects to neighboring contractors who are already mobilized. Moreover, banks would also be more comfortable in extending credit to highway developers.
NHAI also proposed that in case of delays due to government permissions, contractors should be compensated. The compensation amount will depend on the cost escalation of the projects due to delays resulting out of government permissions like environment clearance another major proposal that was discussed and found a positive response is on back loading premium to be paid to the NHAI.
This will give the contractors financial comfort in the initial years of project implementation. The premium will be back loaded in such a way that the NAV of highway projects remains the same.
The roads ministry will now work on the finer aspects of these proposals, which will be placed before the cabinet. In addition, the model concession agreement for highways will be modified by the planning commission.
But the only spanner in this process could be put by the department of economic affairs which feels that there should be an independent regulator for the highway sector. The final call on all these issues will be taken by the cabinet.