NHAI scanner on private companies for fund leak in 11 projects

NEW DELHI: The National Highways Authority of India (NHAI) has drawn a list of 11 road projects where it suspects private developers of diverting substantial portion of funds they have withdrawn for carrying out work.

In three such projects even a single kilometer of road has not been completed whereas the fund withdrawn by private developers is in the range of Rs 365 crore and Rs 1,014 crore. In one project, work on ground is 53% while the developer has taken out the entire fund.

The list has been drawn while taking stock of the 78 languishing projects being implemented in the public private partnership (PPP) mode and this also came up for discussion at a review meeting on December 14, which was attended by developers and bankers. Industry experts said fund diversion is suspected where difference between the work done on ground and funds released is more than 10%.

"Banks are also of the opinion that the amount taken out from escrow account of these projects is much more in comparison to physical progress made. We have given a month's time to concessionaires to show progress. If they fail, we will review the situation and take action as per contract conditions," road transport secretary Vijay Chhibber told TOI.

Sources said while in most cases private developers are not that worried about the future of projects, it's the banks which are doing the running. "Going by the trend, developers have taken out excessive funds and have not spent them on the projects. So, they have no fear of losing anything. It is the banks that are staring at their investment becoming non-performing assets. They are facing the real risk. Developers have their usual excuse of severe liquidity problem for poor progress," said an NHAI official.

He added that termination of contract is likely in at least two cases and in two others bankers have offered to replace the developer for poor performance. They have offered to allow the NHAI to engage a cash contractor to complete the work and recover the investment.

As per contract conditions, bankers have the first right over a project in case of default by the developer since 70% of the project cost comes in the form of loan. "Since we are aware of the problem of lenders, we are asking them to use the one-time fund infusion scheme of the NHAI to get rid of the non-performing concessionaires. Once the NHAI recovers its expenditure from toll collection, banks can get back their investment. They won't face problem of NPA," said an official.

The official said the government's decision to extend the concession period (tolling period) where work has been delayed due to the NHAI's fault will provide them further protection.

Meanwhile, in seven cases bankers and developers have shown keen interest to get the one-time fund from the NHAI to complete work and at least 31 projects are eligible for extension of concession period.