The Rangarajan committee on premium rescheduling of highway projects has proposed a criterion for ?stressed projects? to be eligible for the facility. According to industry experts, if the norm is applied, only 8-10 of the over 40 projects considered for the premium recast would be able to benefit from it, and even among these about five, including those of GMR and GVK, are actually expected to sign in.
The report also highlighted that the rescheduled premium will be treated as ?revenue shortfall loan? as per the Article 28 of the Model Concession Agreement (MCA). A stressed project, as per the panel, would be the one which would still report a negative value after toll collection minus debt, premium and cost involved in operation and management and other expenses on construction and management. Only the balance after these deductions would be considered for premium rescheduling. The panel recommended that the discount rate for calculating the net present value (NPV) of future cash flows would be 10.75% (bank rate plus 2%) as in the current MCA (the finance ministry had earlier asked for a higher discount rate of 12%). It said the NPV should remain the same as earlier and the renegotiation would be only once during the life of the concession. The panel has also kept a strict clause of providing additional comfort to lenders in the form of bank/corporate guarantee. In the case of six-laning, for example, if the developer wants to defer the premium payment during the time of construction, the difference between toll collections and the amount left after debt servicing, premium promised earlier, cost of operation and management will have to be provided as corporate guarantee to the government. The report will now go to the finance minister for a final approval before the relaxation gets extended to the developers. Till now, the panel saw varied views and has not been able to form consensus between all the departments involved. Questions have been raised to as how successful the formula suggested by the committee will be in attracting developers to stick to their projects. The National Highways Authority of India (NHAI) had also written to the highway ministry suggesting that the contracts should be terminated “amicably”, and rebidding should be initiated as there was already a delay of over two years. This includes scraping of contracts for about two dozen road projects, involving an investment of over Rs 40,000 crore. Meanwhile, as reported by FE earlier, anticipating that the Rangarajan formula would not enthuse the developers, the ministry of road transport and highways and the NHAI have readied a backup plan for the 23 stranded highway projects for which premium rescheduling was approved by the Cabinet Committee on Economic Affairs in October. Under the plan, these contracts most of which have anyway become infructuous would be cancelled and the projects would be bid out afresh as smaller stretches. The dearth of new public-private partnerships in build, operate, transfer project awards has hit highway construction badly, even as the NHAI is trying to revive the engineering, procurement and construction model and had awarded 600 km of projects in this category by November-end. With traffic growth sluggish, raising equity difficult and bank funds not forthcoming, there has been tepid response to PPP projects offered by the NHAI this financial year. Just 222 km of projects have been awarded (including re-awards) against 1,116 km in FY13 and 6,491 km in FY12. The long-pending guidelines on rescheduling of premium for highway developers has put over Rs 1 lakh crore of premium payments in limbo where the Planning Commission and department of economic affairs were not in favour of major relaxation despite the Cabinet decision to allow rescheduling.
