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Govt sets up a committee to review bailout policy for the road developers

11 Oct 2013 Evaluate

In order to revive country’s highway sector and to attract more road developers, the government has set up a committee headed by chairman of the PM's economic advisory council, C Rangarajan to decide all terms and conditions of the bailout policy for the road developers. The proposed committee is expected to make its recommendations within one month and around 40 stalled projects that were awarded after April 2010 will be reviewed under this bailout policy.

Meanwhile, Indian highway sector has been facing a series of concerns since 2012-13 and multiple road projects have failed to take-off. So far this fiscal, the National Highways Authority of India (NHAI) managed to award only 479 kms as compared to the set target of 3,000 kms by September 2013. Further, the previous financial year proved to be the worst year for the highway sector as NHAI awarded only 1,116-km road projects against the target of 9,500-km.

Meanwhile, the government is taking measures to revive the growth in highway road projects in the country and has recently approved highways ministry's premium deferral proposal that all highway projects be considered for premium restructuring except 23 premium-based projects selected earlier. Highways ministry hopes that the policy will instill confidence among lenders and attract more financing for the sector. Further, under this policy, the highway authority can extend this rescue-measure to projects that are found to be under financial stress. The government while approving the premium deferral proposal, noted that road developers should now pay a discount rate of 12% on the premium payment and also pay a penalty of up to 0.5% of the total project cost in case of default on their part. Moreover, if toll revenues turn out to be more than projected, the money left after servicing debt and other necessary costs would go to NHAI as advance payment.

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