The road ministry’s proposal to allow companies engaged in road projects to exit immediately after the expiry of the commercial operations date (COD) has found stiff opposition from the Planning Commission and sections of the finance ministry.
Under the norms in place since November 2009, developers must hold at least 26% of equity up to two years after the COD. Moreover, developers of build-operate-transfer (BOT) projects awarded before 2009 do not have the option to exit completely.
While the move is intended to clear ground for new investors in the funds-starved sector, the departments of economic affairs and expenditure of the finance ministry feel that non-serious investors wanting to make quick capital gains could misuse the proposed facility. Sources said this view has also been endorsed by the Planning Commission.
However, sources also said the department of financial services shares the same view as the road ministry.
The proposal was initiated after several banks raised the issue of capital getting stuck in projects. DK Mittal, secretary, department of financial services, then urged the ministry of roads and highways to explore exit opportunities, the official added.
The National Highway Authority of India (NHAI) had seconded the proposal.
?Once you allow such an option, a company that is good at construction can construct the project and make an exit. Later, the project can be given to a company that is good at management. Thus, such policy options will revive investor interest and lead to better management and operations,? said an NHAI official privy to the discussion.
