15 March 2019: The government has come out with a policy for resolution of “stuck” highway projects including the ones where proceedings have been initiated against the companies before the NCLT.
The move is aimed at unlocking huge money of both the lenders and private players including the crisis-hit IL&FS caught in about 28-30 projects as works have come to standstill due to fund crunch.
Sources said the cumulative cost of the stuck projects could be around Rs 30,000 crore.
According to a road transport ministry circular issued on March 9, the road owning agencies including NHAI and NHIDCL can foreclose the contract by signing a supplementary agreement. It said the authority would make full and final payment to the private player for the “value of work done” or 90% of the debt due, whichever is lower.
“The value of work done will be arrived at after a detailed assessment of the progress and the debt due will be as per the contract agreement, which mentions the exact cost of the project. So, there is no question of any company undue benefit, if it has got more loan by inflating the project cost,” said an official.
NHAI officials said almost all the stuck projects are the ones that are being implemented on “build, operate and transfer” (BOT-Toll) mode. The circular also defines the stuck projects that would qualify for such resolution – projects where work has stopped due to inability of the contractor or concessionaire on account of proceedings initiated against them before NCLT under the Insolvency and Bankruptcy Code or default on account of both the client i.e. NHAI, NHIDCL or PWD and the private player.
Officials said the new mechanism will be a win-win model for both the road owning agencies, lenders and private players. “Once the private player exits, we can invite bids for completing the project and start work. Similarly, the lenders would get back some portion of the loan rather than losing the entire amount. In the existing concession agreement there is no provision for any payment, if the contract is terminated before total or provisional completion of the entire project due to contractors’ default.
Hardly any agency does own the responsibility of its default for incomplete works,” said an official who did not wish to be named. The government had set up a high level panel to deal with the stuck projects after IL&FS went bust and bringing works of about 16-17 projects to complete halt.
Sources said similar template can be followed in other sectors such as power and coal where sizeable number of projects are stuck.