Govt relaxes exit norms for road developers

Govt relaxes exit norms for road developers

Aiming to revive the highway sector and attract developers, the Centre on Friday approved exit policy which allows road builders to leave projects midway without paying a fine.

“The Cabinet Committee on Economic Affairs (CCEA) approved the proposal to facilitate harmonious substitution of concessionaire in ongoing and completed National Highway Projects,” an official statement said.

“This will expedite implementation of road infrastructure in the country and insulate the National Highway Authority of India (NHAI) from heavy financial claims and unnecessary disputes,” it added.

The decision came after two major Andhra Pradesh based infrastructure companies, GVK and GMR, sought an exit from a national highway project connecting Rajasthan and Gujarat, and from another project in Madhya Pradesh.

In these projects, the companies have cited delay in getting environmental clearances as the reason behind the pull-out, but the NHAI said it was due to fund crunch.  It has been decided that existing concessionaires both in case of completed and on-going projects be permitted to divest their equity in totality, the statement said, adding this would bring about required flexibility for existing concessionaires in terms of exit options.

Subsequent to the substitution, the leading substituting entity shall require to maintain at least 51 per cent equity holding in project special purpose vehicle, it said.

The proposal aims at revival of the sector by facilitating substitution of concessionaire and “appropriate substitution of the consortium members of concessionaire for project therefore, shall require to be effected by the lenders with the consent of the NHAI. Due to fund crunch, a large number of highways projects have stalled. 

“This year, many people did not participate in bidding for road projects. Our thinking is that by giving this concession, we can attract many people. If there is any contingency, they will be allowed to leave without affecting the project,” Road Transport and Highway Minister Oscar Fernandes said.