Friday , 20 September 2019

Speeding up road projects ? banks to get more say

In an attempt to speed up implementation of road infrastructure projects, especially those held up due to financial reasons, the government has is set to make changes in the model concession agreement for road projects. The new agreement is expected to give more functional and supervisory powers to banks who lend for the projects. If a concessionaire in a project is suspended the lending banks can do an internal review of the project and suggest alternative concessionaires to the Highways Authority. At present the bankers have no role in the selection of the concessionaires. The new rule would help the banks to intervene in situations where the concessionaire is not performing up to the mark and where they fear the credit advanced would turn into bad debt. It is also expected to have a deterrent effect on the concessionaires since banks would take action in case pf non-performance of projects. A principal reason for delays in road projects has been acquisition of the required land which leads to cash flow issues for lending banks. The government is now considering the banks? demand that sanctioned road projects should not be awarded to concessionaires unless the land required has been acquired by the government. Of 146 road projects awarded this year 83 have been delayed. The cost, initially estimated at ?92,000 crore, has risen to ?94,000 crore. The NHAI is planning to factor in inflation while calculating cost of projects to prevent cost overruns.

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