Given the lukewarm response to the relaxed exit policy for road developers announced in June 2013, the government is actively considering allowing lenders to substitute developers even before the project’s commencement of commercial operations. The means that a project need not be declared a non-performing asset (NPA) for the lender to substitute the developer or of the latter to exit.
The new window — of 100% exit — will be open to all projects, already awarded and future ones, unlike the existing policy that is restricted to projects awarded after 2009 where commercial operations had begun.
Currently, for projects awarded before 2009, developers can offload only up to a 74% stake in the project. The balance 26% equity has to remain with the developer till the end of the concession period. Also, as per the current norms, a lender has the right to change the developer only if the latter fails to fulfil the contract and debt-servicing obligations or does not meet the deadlines.
Sources said the ministry of road transport and highways is set to draft a Cabinet note suggesting easy substitution of developers by lenders in what would help unlock funds and accelerate project implementation.
The National Highways Authority of India (NHAI) is also learnt to have supported the move. It is felt that lenders would also welcome substitution of the concessionaire before declaring a project as an NPA. “Many developers want to exit before the CoD (commercial operations date) is achieved but current norms allow them to do so only if the project is declared an NPA or if the developer has not met his contract obligations. The proposed changes are pragmatic and would be a win-win situation for all,” said M Murali, director general of National Hi-ghway Builders Federation.
Stressed developers, who have been servicing the debt but are unable to exit equity due to policy constraints, view the proposal as a possible solution given the equity crunch in the market. “The equity is stuck in the projects and developers are unable to bid for fresh projects, which is why fresh projects are unable to take off,” NHAI chairman RP Singh told FE.
In 2012, NHAI had proposed to the government that the capital shortage in this sector can be better managed if the government could permit complete divestment in both complete and incomplete projects.