Premium rescheduling for highway projects gets Cabinet approval

October 9, 2013


The Union Cabinet has cleared a proposal to permit highway developers to postpone their premium repayment.
The Union Cabinet has cleared a proposal to permit highway developers to postpone their premium repayment.



The Cabinet has approved premium rescheduling for highway developers, but with certain riders.

A senior official in the Highway Ministry said, “the approved proposal would require some more fine-tuning, which has to be thrashed out over the next few weeks by a committee.”

The Highway Ministry is awaiting the minutes of the Cabinet meeting to be able to clarify on the exact content of the approval given, as the proposal contained multiple options of premium rescheduling. Premium is the amount quoted by developers to the National Highways Authority of India to bag the rights to design, widen, finance, operate highway stretches and collect toll from the users over a long period of time.

The Government has been considering a proposal to permit highway developers to postpone their premium payments in a manner that the net value of these obligations are constant over the entire contract period.

Road developers had bagged many highway projects by quoting high premiums to develop or widen highway stretches, maintain these and collect toll from users over a pre-determined period of 20-30 years. Now, they want the projects’ premium payment postponed in a manner that the net value remains the same.

The proposal has been doing the rounds of various Ministries, including Law, Finance and Highways for several months now.

Government officials had been dragging their feet on the issue as the proposal involved re-negotiating contract terms already entered into.

“The premium rescheduling proposal was cleared in-principle. But, a scientific formulation to define stressed projects is required,” said another source.

In a related move, the Cabinet has cleared some toll charge related decisions, which will come into effect on a prospective basis. Simply put, these decisions will be implemented for projects awarded in future, another Highway Ministry source said.

But, in case of renegotiation of contracts, the National Highways Authority of India can use it as a tool. First, truckers who move overloaded cargo will be penalised by charging extra. Basically, the extra cargo will have to be removed from the truck and the trucker will have to pay ten times the pre-defined toll for that vehicle category.

Also, highway developers will have to charge a lower level of toll (75 per cent of pre-defined toll levels), in case they delay in completing projects. Additionally, for projects where two-lane highways with paved shoulders are getting made, developers can charge 60 per cent of toll, subject to the road being physically wider (by another three metres).

Another proposal – to decide the level of toll charges for greenfield expressways – has been referred to a committee headed by Finance Minister, Planning Commission Deputy Chairman and Highway Minister.



Share your comments here: