CCEA approves exit policy for BOT road projects

13 May 2015

1

The Cabinet Committee on Economic Affairs (CCEA) today approved a comprehensive exit policy framework that now permits concessionaires / developers to divest 100 per cent equity, two years after completion of construction, for all road projects built on build-operate-transfer' (BOT) basis.

To give a renewed thrust to the highway sector and to bring the private sector back on board, the CCEA, chaired by Prime Minister Narendra Modi also approved two major policy initiatives aimed at improving the availability of equity in the market on the one hand and authorising the National Highways Authority of India (NHAI) to intervene in languishing projects suffering from lack of funds, on the other hand.

The CCEA noted that during the last few years, PPP projects have not been able to attract bids, mainly due lack of availability of equity in the market among qualified bidders.

The exit policy would help unlock equity from completed projects making it potentially available for investment into new projects.

This decision will also harmonise conditions uniformly across all concessions signed prior to 2009 with the policy framework for post 2009 contracts, which permit divestment of equity up to 100 per cent, two years after completion of construction.

There are 80 such BOT projects awarded prior to 2009 that have been completed and the locked-in equity in these projects works out to approximately Rs4,500 crore.

Once this is unlocked and is re-invested in new projects this could support 1500 km of new highways on PPP mode, thus help in reviving the response to BOT (T) projects, says a CCEA note.

Out of the ongoing 240 PPP projects, some are languishing due to delays on account of land acquisition, grant of statutory clearances, local issues and shortage of construction materials etc.

CCEA today also approved a special intervention for such projects that are in an advanced stage of completion but are stuck due to either lack of additional equity or lender's inability to disburse further.

NHAI has been authorised to provide funds to such projects from within its overall budget / corpus on a loan basis at a pre-determined rate of return. This loan is to be recovered along with interest as the first charge from the toll receipts immediately after completion of construction.

NHAI has been directed to develop a robust mechanism to determine eligibility of the project as also the extent of funds required to complete projects, in a time-bound manner. It is expected that about 16 such projects languishing in various part of the country where public is facing difficulty on account of incomplete works will benefit from this decision, the CCEA added.

Business History Videos

History of hovercraft Part 3...

Today I shall talk a bit more about the military plans for ...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of hovercraft Part 2...

In this episode of our history of hovercraft, we shall exam...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of Hovercraft Part 1...

If you’ve been a James Bond movie fan, you may recall seein...

By Kiron Kasbekar | Presenter: Kiron Kasbekar

History of Trams in India | ...

The video I am presenting to you is based on a script writt...

By Aniket Gupta | Presenter: Sheetal Gaikwad

view more