(NHAI nod to L&T’s Singapore plans, co plans to list six toll road projects)
NEW DELHI: The National Highways Authority of India board has approved engineering and construction firm L&T’s plans to set up a business trust in Singapore and list six toll road projects on theSingapore stock exchange that could raise up to $1 billion.The business trust will be set by the firm’s subsidiary L&T Infra Development Projects Ltd (IDPL) and the parent company can offload its equity in these six road projects to the trust, persons familiar with the matter told ET.The trust will have to form a special purpose vehicle, which will float or issue units to investors on these assets through an initial public offer. The trust will then issue debt instruments in the form of debentures to the SPVs undertaking these highway projects, said the persons, who did not wish to be named.
This will be implemented as a policy measure so that other developers looking at a similar route can follow suit, they said.
“Infrastructure stocks on the Indian stock market are not doing too well whereas the Singapore stock market is and they have mature investors who can handle long-term investments. While this will be subject to many factors including the Singapore stock exchange allowing it, if it is successful it will be a positive development since other developers can use it as an additional source of funding for their projects,” said Abhaya Agarwal, partner-infrastructure and PPP at consulting firm EY.
The six road projects include the Rs 1370 crore Krishnagiri-Walajahpet project in Tamil Nadu which is under implementation and five other completed projects including the Vadodara-Bharuch, Palanpur-Swaroopganj, Krishnagiri-Thopur projects and the Panipat elevated corridor.
The business trust model is similar to REIT or real estate investment trust model which offers revenue-generating real estate to investors.
A spokesperson of L&T told ET, “The company does not comment on market speculation.” L&T IDPL did not respond to the questionnaire sent by ET.
The NHAI board’s approval is subject to certain checks and balances which it has said the company must follow including that the company must get a legal opinion on the matter and the interest rate at which the trust lends to the SPVs must not be more than the interest rate it pays to its current lenders. In addition, the foreign exchange risk must be borne by the trust, it has specified.
“Road projects are public assets and in any case of equity transfer of more than 15%, it has to be approved by NHAI. Also, refinancing or changes in debt structure have also to be approved by us,” said an official familiar with the matter.
Pic for representational purpose. – A Veeramani/DNA
After contemplating the idea of having an elevated road between Bandra and Dahisar, the Maharashtra State Road Development Corporation (MSRDC) now plans to build an elevated rail and road link between Thane and Kalyan.
Speaking todna, SM Ramchandani, the joint managing director of MSRDC, said, “There is a plan to have an elevated road along National Highway 3, that is the Thane-Bhiwandi Bypass Road, for which we have floated bids for consultancy services.”
The consultant is likely to be appointed by the end of this month, who in turn will carry out a feasibility study including a ground survey, cost estimation, financial model, among other things.
In fact, even the Indian Railways has expressed interest in being part of the project by stating that the elevated road corridor can also accommodate a railway line.
The planned elevated link will be around 22-25km long, with entry and exit ramps in between.
The purpose of the project would be to decongest the increasing traffic due to rising population in the far-flung areas of Mumbai.
The state has been focusing on creating new Central Business Districts in the Mumbai metropolitan region, keeping the larger picture of decongestion of Mumbai in mind. However, due to the large cost associated with this elevated rail and road project, it is unlikely that it will be constructed in the near future.
Another official said that the plan is currently in the nascent stage and it should not be considered that the project will take off in the next couple of years.
NEW DELHI: Soon after West Bengal chief minister Mamata Banerjee wrote an angry letter to the PM complaining about norms being flouted in allotment of funds to states, rural development minister Jairam Ramesh wrote to the CM saying his department had finalized funds for 421 roads covering 1,887 km in the state.
While Banerjee wrote to the PM on October 5, Ramesh’s missive came three days later.
In his letter, Ramesh said road work in Bankura, Purulia and Pashchim Medinipur districts would be taken up under the Pradhan Mantri Gram Sadak Yojna (PMGSY) and an agreement would be signed between the PSUs undertaking the job and the Centre and the state government within the next 30 days.
Interestingly, Ramesh mentioned in the letter that funds were usually disbursed through central PSUs doing the work but it was now decided to hand over the funds directly to the state government. “I have been of the view that we should encourage state governments to exercise more direct control on project execution so that quality standards are maintained. Hence, we have decided that for West Bengal, we will release the funds directly to the state government who will then deal with the central PSUs,” Ramesh wrote.
“I am sure you will agree with me that West Bengal has received unprecedented level if cooperation in the matter of PMGSY roads as it has for other rural development programmes. This reflects the central government’s continuing priority to the welfare and well-being of the rural people of West Bengal,” he wrote.
BANGALORE : Inspection of ongoing infrastructure projects is springing surprises at every turn , with decision makers finding that basic approvals haven’t been sought.On Tuesday , Bangalore development minister R Ramalinga Reddy found that the BDA requires 3.2 acrestocomplete the Nayandahalli flyover near Mysore Road which has been hanging fire for two years .Shockingly , the BDA commenced construction without completing land acquisition . The construction of the 960-metre long flyover began in 2010 and was scheduled to be completed by 2013 . Even if BDA gets the required land now , it needs five months to completethe project .Theland belongs to over 40 people .
Last week, during the inspection of the Road Over Bridge near Byappanahalli , mayor Sathyanarayana found that BBMP had commenced work on two ROBs at Byappanahalli and Jakkur without completing land acquisition .
The delay in the Nayanhahalli flyover has become a huge problem for commuters on Mysore Road due to frequent traffic jams . Alongside , work on the Metro rail is on and is adding to the gridlock .
Ramalinga Reddy said , “Since the property is situated on Mysore Road , its value is quite high and the owners expectusto pay the market value . We’ll sort out the issue soon .”
Metro corridor
After inspecting the Metro corridor work , Ramalinga Reddy said the National College Metro corridor will be completed by March 2014, and the train will run from Byappanahalli station to Mysore Roadstation by 2014.He also assured that Metro services from Peenya to Malleswaram would be operational by this year-end and work from Kaggalipura to City Market will be completed by 2015.
Pradeep Singh Kharola , MD, BMRC, said there is a proposal to concretize the road below the Metro corridor from MG Road station to Byappanahalli station . Asked about bad roads below the Metro corridors , he said road work cannot be taken up till Metro work is on .
On parking
BBMP is gearing up to provide parking for Metro commuters. BS Sathyanarayana said BBMP will identity properties belonging to it near all Metro stations. “Ramalinga Reddy has told us to utilize funds under the Jawaharlal Nehru National Urban Renewal Mission scheme for this project,” he said.
NEW DELHI: A week after the government approved a bailout of the highways sector and set up a committee that will draft its details, developers told Prime Minister Manmohan Singh that the rescue plan shouldn’t end up being similar to what they described as the “flawed exit policy” that has failed to attract takers.
The committee headed by C Rangarajan, chairman of the Prime Minister’s Economic Advisory Council, is expected to give its recommendations on the premium restructuring in a month. The final decision will be implemented by the highways ministry after it is approved by finance minister P Chidambaram.
“The guidelines for the rescheduling of the premium for the highway projects are required to address the concerns raised by the sector as a whole, otherwise it will not only defeat the purpose of the policy but also not help in the revival of the road sector,” the National Highway Builders’ Federation (NHBF) said in its letter to Singh. “In the past it is a known fact that because of the flawed exit policy for the road sector announced by the government, it has not been able to attract even a single investment.”
The road developers sought a reduction in costs they have to pay for deferring the premium. According to the Cabinet note sent by the highways ministry, which included suggestions of the finance ministry and the Planning Commission, developers need to pay 12 per cent on the premium as well as a penalty of up to 0.5 per cent of the total project cost in case the default was attributed to them. The concessionaires would also have to give a bank/corporate guarantee to the extent of the maximum difference between the premium promised at the time of bidding and that under the revised payment schedule, according to the cabinet note.
The NHBF letter, also sent to Chidambaram, Rangarajan and roads minister Oscar Fernandes, argued that deferral of premium payments should be allowed at a 9.75 per cent discount rate, the rate at which Cabinet last year allowed telecom operators to stagger spectrum fee payments. NHBF explained that “the proposal of highway sector’s deferment of premium is similar to telecom sector on contract terms and conditions on period of contract and cost involved…”
“A case for some form of relief can be made and the 12 per cent rate needs a relook in the current context.The situation in some sense is similar to the telecom sector relief because they too were going through stress at the time,” said Arvind Mahajan, partner at KPMG, who added that both sides needed to make some sort of concessions. “Many companies involved in projects are highly leveraged. They are also facing execution challenges because of delays on part of NHAI and escalation in project cost,” Mahajan said.
NHBF has argued against the penalty clause saying the viability of most of these projects were eroded because of delays in environmental clearance, land acquisitions, a ban on the procurement of aggregates and so on. NHBF has also opposed the corporate or bank guarantee clause saying most concessionaires are either undergoing corporate debt restructuring and are over-leveraged or bankers are not willing to lend to them.
BHUBANESWAR: The central government has sanctioned Rs 1,493 crore for construction of 2,982-km road in the state under Pradhan Mantri Gram Sadak Yojana (PMGSY).
Union rural development minister Jairam Ramesh communicated the Centre’s decision to chief minister Naveen Patnaik on Tuesday. Ramesh said last year the Centre had sanctioned Rs 2,445.75 crore to Odisha for construction of 5,189-km road. Earlier, this year proposals worth Rs 1,067 crore were sanctioned for 1,184-km road. Jairam’s letter said the state government could send more proposals for road construction before December.
While unhesitatingly approving road construction projects for Odisha, the Union minister expressed doubt over the state government’s ability to execute them. “The execution capacity is a major concern. The state will have to establish a minimum of 20 more project implementation units (PIUs) for expediting the sanctioned road projects. The state is having a workload of about Rs 6,000 crore and has engaged only 50 PIUs, whose capacity is only about Rs 3,125 crore,” Ramesh’s letter reminded Naveen. He also said the state government should send proposals for road connectivity to villages having more than 100 population in 18 IAP districts soon so that they could be approved ‘in the next couple of months’.
Ramesh said Odisha had ‘received unprecedented assistance’ from the Centre in the matter of rural roads. “However, around 13,000 km still remains to be sanctioned, which indicates the magnitude of the challenge,” the Union minister said, adding, the centre was ready to approve projects ‘provided the state government is able to submit the DPRs and expand contracting and implementation capacity expeditiously’.
(RB Infra today announced it has commenced operations on its Rs 1,733-crore Jaipur-Deoli build-operate-transfer (BOT) project.)
MUMBAI: IRB Infrastructure Developers today announced it has commenced operations on its Rs 1,733-crore Jaipur-Deoli build-operate-transfer (BOT) project.Implemented by its wholly-owned special purpose vehicle called IRB Jaipur Deoli Tollways, the company has begun partial toll collection from September 27, a statement said.
The company had and sought viability gap funding of Rs 306 crore from the National Highways Authority of India ( NHAI). The concession period for the project is 25 years.
(By October-end, six annuity projects worth Rs5,784 crore and four toll-based projects worth Rs11,274 crore will be opened for bidding.)
NEW DELHI: Road projects worth Rs17,000 crore are to be awarded in the next five weeks after nearly 18 months of muted activity. The fate of these projects would be a good indicator of private investors’ willingness to bet on the government’s renewed push to infrastructure sector in recent weeks.By October-end, six annuity projects worth Rs5,784 crore and four toll-based projects worth Rs11,274 crore will be opened for bidding.
This also includes the Rs9,654-crore Agra to Lucknow eight-lane expressway project, which will be implemented by the Uttar Pradesh Expressways Industrial Development Authority (UPEIDA).
“This can be a good barometer to judge the market sentiment. There are people who are hungry, but only financially viable projects which have land and requisite clearances in place will find takers,” said Abhaya Agarwal, Partner and Leader, PPP, at EY.
The pace of award of highway projects has been slow because of issues like poor market sentiment, shortage of equity, lenders’ demand for 100% possession of land, delays in getting clearances, banks reaching their exposure limit towards the infrastructure sector and a ban on quarrying of stones and minig of ordinary earth used in road construction.
This year the National Highways Authority of India (NHAI) has awarded only 479 km against its target of 3,000 km by September. In the previous financial year, projects for only 1,116 km were awarded against the target of 9,500 km.
However, Shravan Shah, senior research analyst at The Market Financial Intelligence, is optimistic. “The projects being opened for awarding could bring a ray of hope.
Most of these projects including those in Assam, J&K as well as the Agra-Lucknow expressway are largely ready and there is a high chance that developers would pick them up,” said Shah.
The drastic slump in market sentiments prompted Prime Minister Manmohan Singh to address things personally. The PM promised to kickstart several stalled infrastructure projects worth Rs 1.5
lakh crore including two new ports, eight new airports, new industrial corridors and rail projects. “We have recently taken many steps to speed up the process of government clearances for industry, build an environment more conducive to trade and industry and increase investment in the economy.
A special cell has been set up to help big projects with clearances. The Cabinet Committee on Investment is working to remove hindrances in the way of stalled projects,” said the Singh in his Independence Day speech, adding that investments would increase because of these efforts in the coming months.
Several of the issues have been addressed with the government allowing de-linking of environment and forest clearances, relaxations on mining of ordinary earth and so on. It has also approved policy changes allowing stressed developers to fully exit highway projects.
“At this point, developers are looking for a balanced portfolio with a mix of toll-based and annuity-based projects. Toll-based projects have risks involved including traffic projections not matching the actual.
Annuity on the other hand, means assured payments,” said a senior official from an infrastructure major, adding that private players have lost their appetite and would only take up projects after doing a proper assessment on the viability.
MUMBAI: In a relief for thousands of motorists who get stuck in traffic at Kalanagar junction in Bandra (east) every day, the city’s development planning agency has hit upon an out-of-the-box solution.The Mumbai Metropolitan Region Development Authority (MMRDA) has proposed to build a two-lane bypass over PWD land to connect traffic from Dharavi T-junction to the Bandra-Worli Sea Link approach road for faster dispersal of vehicles. It will soon submit the proposal to the public works department for approval.
“The bypass is being proposed on the land where the PWD offices are located. Enough space can be created on this portion of the land to build the road,” said a senior MMRDA official. As the land belongs to a government agency, the MMRDA does not anticipate any hurdle in acquiring the land to build the bypass road.
For the last few years, the MMRDA has been struggling to reduce traffic snarls at Kalanagar junction—one of the busiest intersections in the city. It connects the island city to both the western suburbs and the eastern suburbs via the Sion-Dharavi Road. As a short-term measure, MMRDA has also decided to implement, albeit partially, suggestions mooted by the Mumbai Environmental Social Network (MESN) to ease traffic congestion at Kalanagar junction.
“The median on the Western Express Highway at Kalanagar will be pushed back slightly. Vehicles coming from the sea link direction can directly drive to Bandra-Kurla Complex. At present, these vehicles have to take a sharp U-turn below the flyover to come on to the Sion-Dharavi Road and then take a left turn to enter BKC,” said the senior MMRDA official.
Also, the width of the two bus stops will be reduced thus, creating an additional lane for a bus-bay. “This will ensure that BEST buses halting at these stops will not block the traffic coming toward Dharavi T-junction from the northern direction,” said the official. “The other solution to cover the drains along the north-bound carriageway of the Western Express Highway (WEH) is not being undertaken yet as this will require the municipal corporation’s approval.” Civic officials may disapprove this plan as they would prefer the drains to remain accessible to ensure regular cleaning.
CHENNAI: Yet another central government project in Tamil Nadu has been stalled with the National Highways Authority of India (NHAI) cancelling the contract for a new four-lane Coimbatore-Mettupalayam road, an extension of the existing NH67, citing lack of support from the state government. The 535 crore plan is the third major NHAI project to be halted in the state after the Chennai Port-Maduravoyal elevated road and widening of the Trichy-Karaikudi highway.In a letter to the Union transport ministry on Tuesday, NHAI general manager (Tamil Nadu) I S Rana said the work order, to be given to the contractor, could not be signed due to non-availability of land. “With the state government withdrawing the consent for the alignment, there is no likelihood of making the land available for the project. Since it cannot be kept in abeyance indefinitely, the matter for withdrawal of work order was placed before the NHAI board and approved,” he said.
NHAI has asked the ministry to entrust the existing highway stretch back to the state government for maintenance and development.
