An expert panel, headed by the Prime Minister's Economic Advisory Council chairman C Rangarajan, will soon examine the proposal of financially stressed highway developers seeking a bailout in the form of deferral of the premium payment from the government. The panel will also scrutinize the moral hazard of allowing such post-contract concessions which the road ministry and National Highways Authority of India (NHAI) are expected to benefit to around 40 stalled projects in this case. The panel, expected to be formally constituted this week, will submit its report in a month.
Earlier in October, the government had decided to set up the committee under Rangarajan to work out the modalities of the highly contentious bailout policy. Meanwhile, the opinions regarding the policy are still divided between the highway ministry and NHAI. The NHAI has demanded that the discount rate should be kept at 10%, no penalty should be imposed and no corporate guarantee should be taken from developers. On the other hand, road ministry is in favour of a 12% discount rate as well as imposition of penalty to avoid any undue advantage to a handful of developers. The government wants to decide soon on bailout policy as it is cautious over the adverse impact of the delay in decision-making, which has already stagnant investment flows in the highways sector. In the previous fiscal, road ministry awarded only 1,400 km of projects against a target of 9,500 km and had cited reasons like lukewarm response by the bidders owing to a number of factors including delay in clearances. For the current fiscal, road ministry has set a target of 5,000 km highway roads.
Further, in order to boost country’s infrastructure sector, the government is also formulating a plan to determine the way in which bad assets are recognized, which will give lenders more leeway to rescue projects and will give a strong push to infrastructure investment. The government has identified the development of infrastructure a most critical prerequisite for sustaining the present growth momentum of the economy. The government has set the $1-trillion investment target for the infrastructure sector for the 12th Five Year Plan (2012-17).
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