The Delhi-Gurgaon toll road project is getting further tangled in controversies. The Highways Ministry is considering whether a criminal liability case can be made on the project.

This is what emerges in a letter sent by Highway Ministry Secretary Vijay Chhibber to NHAI Chairman R.P. Singh on Thursday.

Simultaneously, the Haryana Government has backed off from its earlier stated intention of buying out the project to make it toll free and ease the pain for commuters facing jams on the toll road. With this, National Highways Authority of India (NHAI) will have to buy-back the concession agreement, at the earliest, the Secretary said.

On Wednesday, NHAI Chairman had written to Highway Secretary to decide how the project could be handed over to Haryana State Government.

A day later, on Thursday, the Road Secretary wrote back to NHAI that in a meeting between Highways Minister and Haryana Chief Minister – held in the presence of Highway Secretary, NHAI Chairman and Haryana Chief Secretary – it was “patently clear that the Government of Haryana is not pursuing its earlier intention of buying out that project”.

Given the importance of the issue and the prevailing uncertainty, the Ministry will also seek assistance from Attorney General to represent NHAI in pursuing this matter in Delhi High Court. This project is already under dispute due to the multiple issues and hearings are going in Delhi High Court.

Due to the toll road developer not meeting his commitments on road maintenance and commuters facing a lot of inconvenience, NHAI had decided to terminate the project.

But, the project lenders – currently led by IDFC – have given more money to the developer than the project cost agreed upon by the Government. So, if the contract is cancelled, they will get less money from the NHAI. Now, the lenders do not want NHAI to cancel the project as they have to chase the road developer – DSC Ltd – for the repayment, who is already financially stressed.

Indications are that the issue has been referred to Chief Vigilance Commissioner and the Enforcement Directorate to pursue whether the road developer had used inter-corporate deposit route to transfer funds from the escrow account, where toll money received from project were kept.

Source-http://www.thehindubusinessline.com

Should financially-strapped highway developers be allowed to ‘reschedule’ the annual premiums they had offered to pay while successfully bidding for projects? This is becoming a classic case where several government arms want to escape the burden of saying a clear ‘no’, even though they do not want to say ‘yes’.

With a ‘no’, the UPA-2 government risks staining its report card on the highway development front at a time when it — and the economy — badly needs projects taking off the ground. Developers dumping projects isn’t good news when elections are barely months ahead. But a ‘yes’ could also mean taking decisions that the Government’s audit arms may question in future.

For almost six months now, a proposal to permit highway developers to postpone their premium payments in a manner that keeps the net present value of these obligations constant over the entire contract period, has been doing the rounds. It has been, to use official language, “under consideration”, with the Government neither accepting it nor rejecting it categorically.

THE GENESIS

The entire “under-consideration” exercise started as an attempt by the National Highways Authority of India (NHAI) to prevent developers walking out of road projects that they had won only two-three years ago.

They had done so by quoting high premiums payable to NHAI in return for getting the right to develop or widen highway stretches, maintain these and collect toll from users over a pre-determined period of 20-30 years.

Those were, of course, roaring times when everything seemed to be going right for the economy. So, instead of seeking a subsidy — viability gap funding — most developers raced to bag ‘design-build-finance-operate-transfer’ concessions by offering ever high premiums.

But with economic growth slowing down — from 8-9 per cent at the time of the award of contracts to 4-5 per cent now — and high inflation pushing up project costs, many developers have ‘discovered’ the same projects to be financially unviable and not capable of realising the toll revenues that they had originally projected. And luckily, they have found solace in Government’s inefficiencies, such as inability to get regulatory clearances on time.

Thus, the likes of GMR, GVK and Ashoka Buildcon have laid the blame on environmental/forest clearances and land acquisition. These clearances were delayed to such an extent as to change the entire project finance equations. Besides these developers, there are others too watching from the fringes as of now, although they haven’t served any termination notices on the NHAI.

Currently, there are some 15 highway projects that were awarded in 2011 but are yet to achieve financial closure.

DOING THE ROUNDS

In January, GMR announced its decision to seek termination of a 555-km, six-laning project between Kishangarh and Ahmedabad, while officially citing delays in obtaining regulatory various nods.

The infrastructure company had committed to pay a premium of some Rs 32,000 crore over the project period of 26 years. Interestingly, the Comptroller and Auditor General of India pulled up the NHAI on GMR’s threatened pull-out, saying that it would jeopardise potential premium revenues of Rs 32,000 crore from the project.

It was in this context that the NHAI Board, in March-end, approved a proposal by GMR for premium rescheduling. The approval, however, came with a dissent from the Expenditure Secretary R.S. Gujral and concerns raised by the Planning Commission Secretary Sindhushree Khullar. Both are members of the Board.

Since then, the Ministry of Road Transport and Highways has suggested some changes to frame a common policy for all such cases, involving premium rescheduling.

It sent a note to the Law Ministry for approval. The latter, in turn, turned the proposal down on grounds that it would amount to renegotiation of contracts.

The NHAI Chairman R.P. Singh, on his part, has sought an informed decision from all concerned Ministers. A ‘no’ to the proposal would ultimately endanger potential premium revenues aggregating about Rs 98,000 crore over 26 years, having a net present value of Rs 26,000 crore.

Following the NHAI Chairman’s intervention, the Law Ministry seemingly diluted its stance on the issue, while referring the matter to the Finance Ministry.

The latter, while proposing some riders, agreed to a one-time renegotiation, subject to concurrence from the Law Ministry.

The Road Ministry has since floated a Cabinet note listing all the available options. But what will emerge from all this isn’t clear. This rigmarole was only to be expected, since the proposal eventually involved reworking the norms of a contract that private firms had already entered into with the NHAI.

Contract renegotiation is not an area government officials are comfortable with, more so, given the potential risk of attracting audit scrutiny. And the timing — with elections around the corner and a government already under attack for Coalgate, Spectrum, Commonwealth Games and whatnot — couldn’t be worse.

THE ROAD AHEAD

The Government’s indecisiveness is due to lack of confidence, and there’s some over-defensiveness born out of previous scams.

At the same time, what it needs to also bear in mind is the fact that by not going in for renegotiation and instead allowing developers to exit, it jeopardises potential premium revenues in the future. That is something even the CAG has alluded to.

In other words, for the Government, it is a case of damned if you do and damned if you don’t.

The best way out of this mess is to follow some basics. If the Government decides to renegotiate a contract, it is important to not lose sight of the core aim of such an exercise.

In this case, the purpose clearly is to salvage highway development contracts that are on the whole favourable to the Government — those that can be physically executed on the ground, while protecting the Government’s financial interests.

Second, assuming clarity in regard to the core aim, the renegotiating conditions have to be transparent.

So, if the different arms of government arrive at a consensus proposal, they should discuss the final form of proposal with the developers before taking it to the Cabinet, to get an idea of whether the rescheduling proposal has any takers.

Unilaterally presenting a ‘take-it-or-leave-it’ proposal that developers don’t find viable defeats the very purpose of renegotiation. Else, the Government should have the spunk to say a simple ‘no’ (to any renegotiation)!

Source- http://www.thehindubusinessline.com

JALANDHAR: The National Highway Authority of India (NHAI) has released Rs 17 crore to the Punjab and Haryana governments for undertaking immediate repair and maintenance of NH1 between Panipat and Jalandhar.

The NHAI has also served a notice on project concessionaire Soma Isolux asking it to suspend toll collection as it was not maintaining the highway. “We have released Rs 9 crore and Rs 8 crore to Punjab and Haryana governments, respectively, to ensure that the highway was immediately repaired as commuters were facing difficulties due the bad condition of the road at several places. This amount would be added to the account of the concessionaire,” said NHAI member (finance) Satish Chandra.

JAIPUR: In an attempt to expedite the widening of Jaipur-Delhi highway and break the deadlock between National Highways Authority of India and Rajasthan government, chief secretary CK Mathew will hold a review meeting on Tuesday.

Facing the wrath of public over constant delay and dilapidated condition of NH-8, the state government and NHAI will look for available options. The meeting has been convened after governor Margaret Alva too expressed her displeasure over the current situation.

Agency: DNA

AICTSL likely to get four new ibuses by month end, says CEO.

The union ministry for road transport and Highways may yield to a request by the National Highways Authority of India to consider 16 more projects for premium rescheduling if the Cabinet Committee on Economic Affairs decides to provide a one-time relief to 23 projects for rescheduling their premium.

The Cabinet Committee on Economic Affairs would soon be considering a proposal to reschedule premium payment worth Rs 98,000 crore to be paid by private concessionaires to NHAI for 23 road projects. If 16 more projects are approved for rescheduling then another Rs 53,000 crore premium payment due to be paid to NHAI would need to be rescheduled.

Companies including Larsen & Toubro, IDFC, Ashoka Buildcon and Oriental Structural Engineers are among the 16 companies looking to be considered for premium rescheduling for various projects, said an official. NHAI has been repeatedly holding meetings with officials in the ministry to take up the case of 16 projects as they fear a backlash from the project concessionaires.

“We can look at providing relief to the projects if CCEA agrees to reschedule premium in the first place. This is a one-time relief and not a policy, so we are hoping that they agree to it”, a senior official at ministry of Roads told Business Standard.

The issue of rescheduling for 16 projects emerged since these project developers had achieved the appointed date. It is the date on which the contract period begins. According to the norms, once a project is awarded to a concessionaire, it has to complete land acquisition and take clearances from the environment and forest ministry. The developer has to tie up funds besides meeting other norms. Once these norms are achieved, an appointed date for start of construction is said to have been achieved.

Meanwhile the official also added that the Finance Ministry has recommended that a stress test be conducted to find out the number of projects that are seriously affected due to various reasons before rescheduling their premium.“The finance ministry has recommended that we conduct a stress test to find out who are in real trouble and they have a valid point. With regards to the 16 projects, we feel that they need some help and we will see what we can do from our side”, the official added.

Premium is an amount that concessionaires pay to NHAI for a BoT (Build-Operate-Transfer) project as they feel that the returns from the project are expected to be very high and is usually decided on the basis of future traffic flow at the time of bidding.

The ministry is considering a premium rescheduling in a bid to give a breather to companies for a few years considering a slowdown in the economy. According to the premium rescheduling plan, concessionaires are expected to pay lesser premium for a few years and then subsequently increase their premium without affecting the total payment.

“Basically, it’s a breather so that we can kick start the projects and once traffic picks up, they can pay back higher amount in the future. At this point, we need these measures to encourage private sector investments”, an NHAI official said.

NHAI had in their board meeting proposed that 23 projects be considered for premium rescheduling and forwarded the request to the ministry of roads. Following concerns raised by the remaining project concessionaires, NHAI then requested that the remaining companies be added to the list.

The move to restructure premiums were proposed against the backdrop of some private infrastructure firms pulling out of road projects due to delays in regulatory clearances like land acquisition and environment clearances.

“Except a few cases, there is actually no need for premium restructuring. The government has actually taken a number of steps to ensure that the private sector is not affected and it is the companies who are at fault as they anticipated that the economy will continue to grow at the same pace as it did. There are some genuine cases where for reason such as a ban on mining, the traffic flow has fallen, But otherwise there is no genuine.

Source-http://timesofindia.indiatimes.com