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CCI likely to consider proposals to ease norms for highway projects

20 Mar 2013 Evaluate

The Cabinet Committee on Investment (CCI) is likely to consider few proposals for the highway sector. The proposal relates to relaxing the exit clauses of highway developers that would enable developers to exit early and make way to investors to come in and replace current developers who are struggling with finances; and are unable to build roads. Currently, there are no limits for highway developers for exiting from projects and to what extent they can exit.

The only condition is that firms that replace current developers should meet the net-worth criteria to bid for the project. With this move, the government wants to make the developers more cautions towards the road projects. CCI would also consider another proposal to permit investors in those projects that have achieved financial closure but are stressed due to lack of equity funding.

Earlier, in order to increase the investment in road projects, the finance ministry has urged the Reserve Bank of India (RBI) for considering a change in its stance to treat loans to road projects as unsecured. Central bank treats road sector loans as unsecured, as land in road projects is publicly owned and loans taken for them cannot be backed by assets, which makes the borrowing cost higher for the projects. In 2012, the project finance for infrastructure projects in the country has gone down by 49 percent.

Recently, in other positive development for the highway sector, the Supreme Court (SC) allowed delinking the two clearances as sought by the Ministry of Environment and Forest (MoEF). With the SC allowing modification in norms, 20 delayed highway projects worth Rs 27,000 crore investments are expected to be executed soon.

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