21 projects will benefit due to premium rescheduling: NHAI

The Finance Ministry decision to reschedule premium for roads, as suggested by the Rangarajan Committee, is likely to benefit 21 highway projects, says RP Singh, Chairman NHAI. "Almost all big concessionaries are likely to benefit from the new norms," he told CNBC-TV18's Latha Venkatesh and Sonia Shenoy. The approval is effective from today while Highway Ministry and the National Highways Authority of India (NHAI) will take it up on case-to-case basis now.As per the new norms, the developer will have to pay interest equal to bank rate+2 percent on premium amount deferred. The road developer will have to clear due premium collected due to years of deferment a year before its concession period gets over. The recommendations also propose penalty for projects, where delay on account of fault of project developer. Post this move, road projects worth Rs 20,000 crore (awarded between 2011 and 2013) could be scrapped and might see re-bidding. According to Singh, projects where construction has started are also eligible. He said projects for 2 to 4 laning expansion will benefit majorly from the norms.  The FY14 target for road awards was revised down from 9,000 km to 5,000 km. Shares of IVRCL, L&T IDPL, Ashoka Buildcon, Gammon, GVK and GMR were all buzzing in trade today.

Below is a verbatim transcript of Singh’s interview on CNBC-TV18Latha: How many projects are on your radar for this deferring of premiums and how many do you think will be able to take advantage in the sense they are at a stage of toll collection anytime soon?A: There are 21 projects, which are 2-4 lane projects. Most of these will be benefited which are already ongoing. Apart from that there are about 10-12 projects, which are yet to start. This incentive will now enable them to take a decision quickly to start the projects.Latha: Can you rattle off some of the names that you have in your mind in those 21 four-laning projects?A: The 21 four-laning is a very large list. Almost every company is involved. The 11 projects, which are four-six lanes, which have already started, will also benefit. Basically, the decision will have the impact that the existing projects if you are having a revenue shortfall to meet the debt obligation. Now none of them will become non-performing assets (NPAs) because the dues to the banks will now take precedence over the premium payable to the NHAI. The advantage is that the whole sector which was facing the serious problem of the number of projects becoming NPAs that problem will now be taken care of.As far as the starting of the new projects is concerned, as far as 2-4 lane projects are concerned, GVK is project which was very big project in this 2-4 lane project. The GMR project is 4-6 lane project. The 2-4 lane project will be incentivized in a big way. As far as 4-6 lane project is concerned, they were expecting to use part of the revenue coming during the construction period through the toll. As you know, in those projects, the toll starts right from the day they take over the appointed date. Those roads are already being tolled. So for them, they will not get benefit of deferment during the construction period because there will be moratorium. So when there is moratorium and there will be no debt obligation is there, the money will have to be paid to NHAI.Latha: What is the total amount involved in these 2-4 laning projects which you said have the best chance to get the advantage?A: The premium involved in the 21 projects which are ongoing is of the order of about Rs 29,000 crore. Premium involved in the projects, which are ongoing 4-6 lane, the number is small compared to 2-4, premium is very high in these projects, almost of the order of Rs 50,000 crore.Sonia: What could be the penalty for the projects where the delay has been on account of the project developer themselves?A: There will be hardly any case, there will not be concomitant delay on our part. So most likely this kind of problem will not arise. It maybe an hard case where there is absolutely no delay in our part and the concessionaire has only defaulted. That kind of case we will see.Latha: The analysts community was telling us that the number of projects, which could be scrapped because the bid was way too aggressive is about Rs 20,000 crore, is that a fair assessment, the projects awarded between 2011 and 2013?A: No, even if just GMR alone gets cancelled, the premium is of the order of about Rs 30,000 crore. So I don’t think that figure is correct.