FinMin to support stalled highway projects under PPP

After a concerted push from the road transport ministry,the finance ministry has agreed to consider offering concessions to stuck highway projects under the public private partnership (PPP) mode

After a concerted push from the road transport ministry,the finance ministry has agreed to consider offering concessions to stuck highway projects under the public private partnership (PPP) mode.

Government sources indicated that the approval came through at a meeting between finance minister P Chidambaram and road transport minister CP Joshi on Thursday.

The finance ministry earlier was not fully in favour of helping existing troubled PPP projects,as it is not the governments responsibility offer relief to such projects. After a meeting with the road transport minister,they have now assured their support for such projects, said a government official in the know.

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This includes the possibility of developers backloading payouts to NHAI in the latter years of the concession period to offer relief early into the contract.

Due to the slowdown in the economy and delay in approvals from the government,around 20 projects worth around Rs 2,500 crore have not been able to wrap up their financial closure and are in the extension period.

Every project gets 180 plus 120 days to complete their financial closure and the 20 projects are in their 120 day extension period.

GMR Infrastructure and GVK Infrastructure have already sent termination notices for a project each to the National Highways Authority of India (NHAI).

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GMR walked out of 555-km Kishangarh-Udaipur-Ahmedabad project and GVK walked out of 330 km Shivpuri-Dewas project citing that the delays in approvals had rendered the project unviable.

Meanwhile,in a meeting held in the Prime Ministers Office last week,it was discussed to introduce some changes in norms for PPP projects,including compensating them for delays,to generate interests for such projects.

This is the first time the government is discussing ways to compensate PPP projects for the delay. Till now,increase in project cost of Engineering Procurement Contract projects due to delay are compensated. Unlike PPP projects,government funds EPC projects (TPC).

Compensation for these projects will be offset the increase in total project cost during the delay caused due to late arrival of government approvals and would go to as high as two per cent of the total project cost.

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Meanwhile,GMR Infrastructure has also written to the PMO showing interest in taking back the project,only if the government provides some relief,which seems unlikely.

Road ahead

* Around 20 projects worth around Rs 2,500 crore have not been able to wrap up their financial closure

* Every project gets 180 plus 120 days to complete their financial closure. The 20 projects are in their 120 day extension period

* GMR Infrastructure and GVK Infrastructure have already sent termination notices for a project each to the NHAI

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