‘Don’t allow highway developers to exit before project completion’

November 25, 2013

OUR BUREAU| NEW DELHI

IIFCL opposed to the NHAI and Road Ministry stance that the exit norms for highway developers should be relaxed.

Highway developers should not be allowed to exit from projects till the highway stretches are constructed, a senior India Infrastructure Finance Corporation Ltd (IIFCL) official said.

This stance of IIFCL’s, which has disbursed around Rs 9,300 crore for road projects, is important in the backdrop of the Highway Ministry taking a re-look at the exit clause for highway projects.

IIFCL has sanctioned (net) about Rs 18,000 crore for road projects. It is the largest loan segment for the infrastructure financier. “Do not allow a developer to exit till construction has been done,” Sanjeev Ghai, Chief General Manager, IIFCL said, speaking at a traffic technology conference.

PROPOSAL ON TABLE

The Highway Ministry is reviewing a proposal to allow developers to sell their stake and exit from projects before they are permitted to underthe terms of the contract with the National Highways Authority of India.

At present, there are different rules regarding exit of road developers from their projects, depending on the year in which they had bagged the project. If the project was bagged after 2009, the exit norms are easier. But, for projects awarded before 2009, the norms are tighter and do not allow developers to sell stake before some years of operation.

The NHAI and Road Ministry had earlier taken a stance that the exit norms for highway developers should be relaxed. But, the Cabinet approved a proposal which allowed for lender substitution, something that has not taken off.

This is because highway developers raised concerns, saying, among others, that with the forming of a new special purpose vehicle, the income tax benefits of a 10-year infrastructure project are not transferred to the new developer who acquires the project.

“Senior lenders are unwilling to substitute during construction,” said Anand Kumar Singh, CGM, NHAI.

Mukesh Kumar, Vice-President, Infra Group, SBI Capital Markets, said that stake sale should be allowed between highway developers.

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(This article was published on November 23, 2013)

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