NHAI proposes to set up new entity to push unfinished projects

NEW DELHI: National Highways Authority of India (NHAI) has proposed setting up of new entity, sort of an asset management company, to push completion of unfinished highway projects, which are facing major delays due to non-availability of finances from private developers and financial institutions. The proposal will come up for consideration at theNHAI Board meeting next week.

Officials said NHAI has sent this proposal to Indian Bankers Association (IBA) as bankers and financial institutions have to play a major role towards this end and such a proposition would help banks, which are staring at many of the highways projects, which are close to becoming NPAs (non-performing assets).

At least two financial institutions and banks have shown keen interest to take stake in this proposed entity. Officials said NHAI will put the initial money and other stakeholders would contribute. "With NHAI being a major player in this entity, which would push clearances and resolve problems to complete projects fast, the stakeholders would be comfortable in such an arrangement," said a source in the government.

There will be two options before the proposed entity. First, it can take over stressed projects from private developers as per the substitution clause of the concession agreement. In this case, the present lenders have to agree to the substitution of private developer. Once the project is completed, the entity can either start collecting toll to recover the investment or can sell the project.

The second option is that the new entity can take up projects that need less investment to complete small portions of delayed projects. In this case, after completing the project by injecting funds, the entity would be allowed to collect toll for some period to recover its investment. Subsequently, the lenders would get back the project to recover their investment by collecting toll for the remaining period of the concession agreement.

National Highways Authority of India