In the highway sector, the Union government on June 22 paved the way for developers to exit projects in between by diluting equity in favour of an interested company. The move would facilitate faster completion of the projects, since there are many concessionaires not interested any longer in the projects they’d taken up and/or not able to achieve financial closure as the investment climate faces a downturn.
The Cabinet Committee on Economic Affairs (CCEA) approved a proposal to allow companies to buy out an existing concessionaire, provided lenders to the project agree and the substituting company takes at least 51 per cent of the equity. It has been decided that existing concessionaires, both in case of completed and ongoing projects, be permitted to divest their equity in totality, an official statement said.
However, this will require consent of the National Highways Authority of India (NHAI). The decision has been taken in view of the prevailing lack of interest among prospective bidders for highway projects under the public-private partnership (PPP) mode and The difficulties faced in achieving financial closure for awarded contracts in an already subdued investment climate, the statement said.
Lenders’ representatives, in consultation with the concessionaire, would invite, negotiate and procure offers, either by private negotiations or public auction or tenders for the takeover and transfer of highway projects. The government admits it failed to evoke a good response for highway projects.
Looking at the previous year's achievement, a very ambitious target of award was set. Unfortunately, the response under PPP was extremely poor. No response was received in respect of many projects, even after repeated bid invitations, the offical statement said.