Global rating agency, CRISIL in its latest report has said that various reforms initiated by the government to ensure speedy approvals and clearances has aided the pace of construction of roads, which improved 40 per cent from an average 4.3 km per day in FY2014-15 to 6 km in FY2015-16 and is further likely to reach 11 km by FY2018.
The rating agency pointed the key policy reforms which include easing of the clearances process, ensuring 80 per cent land acquisition before the award of project, premium rescheduling, allowing developers to fully exit operational road projects, and introduction of the hybrid annuity model, aimed at reducing risk to increase private participation.
The rating agency’s analysis of 85 under-construction and 104 operational BOT and annuity projects awarded by the NHAI, which together span around 16,600 km, showed there has been a 13 per cent reduction in high-risk projects over the past fiscal. These risks pertain to completion of under-construction projects and debt servicing ability for operational ones. On reforms in land acquisition, CRISIL noted that of the 40 projects tendered by NHAI during 2015 and 2016 (calendar years), a large portion of the land was already in place at the time of tendering. As per the report, within the 85 under-construction BOT projects, there has been a 10 per cent reduction; however, as many as 4,600 km of projects are still in the high-risk category because delays in land acquisition and approvals increased costs by 20 per cent or Rs 11,000 crore and the financial health of sponsors remains weak.
Also, report said that the 104 operational projects shows a significant 18 per cent reduction in both length (to 2,700 km) and outstanding debt (to Rs 19,650 crore) of high-risk operational BOT projects compared with 2015. Consequently, 65 per cent of the operational portfolio has a debt service coverage ratio of over 1 times compared to 55 per cent a year back.