Road ministry likely to relax premium payment norms - NDTV

New Delhi: The road ministry is now looking at a proposal to relax premium payment by concessionaires to National Highways Authority of India (NHAI). The proposal is to allow concessionaires to pay premium only after completing construction work of the road project. Construction time typically takes three years. Currently, concessionaires have to pay premium to NHAI, the day the concessionaire signs the concession agreement with NHAI. "I feel the entire model is flawed. Why should the concessionaire pay the premium to the government from the money that he has got as debt from the lender?" asked a senior official at the road transport ministry. "He should use the money for construction," the official said adding that the ministry is ready to review the model concession agreement which is the document based on which projects are bid. The road ministry wants a clear distinction between projects with viability gap fundin g (where government pay a certain amount of money for construction) and those which are revenue paying projects like build, operate, transfer (BOT) with toll. The ministry is likely to take this up with finance ministry and Planning Commission before it takes the proposal to cabinet. If the proposal is approved by the government, at least 15 projects including GMR, Reliance Infra, Gammon, HCC, IVRCL and Ramky are expected to benefit. It will be worth mentioning that GMR has offered to backload its premium payment for its Kishangarh-Udaipur-Ahmedabad highway project. NHAI chairman R P Singh told NDTV Profit that the NHAI board has accepted GMR's proposal and now it is for the Cabinet to decide. GMR has to pay Rs 636 crore annually as premium to NHAI for the 555 km Rs 6000 crore project. GMR has said it would pay the premium in the last few years of the concession period of 20 years. The net present value (NPV) of Rs 9000 crore will, however , remain the same. GMR has also 'committed a corporate guarantee' for the project, top road ministry officials told NDTV Profit. Though NHAI chairman has said that the NHAI board has accepted GMR's offer, the fact remains that secretaries of Planning Commission and department of expenditure, Finance Ministry are opposed to GMR's offer. Finance ministry feels GMR is a closed contract and there is no point re-opening it. Planning Commission feels the Ministry of Corporate Affairs has enough provisions to settle GMR-like cases. Road ministry's view is it cannot draw a plan or make any changes to policy for just one company. Any decision the government takes will cover the entire road sector. Top road ministry officials told NDTV Profit that they are trying to resolve all issues in the road sector including the GMR case also because the Comptroller and Auditor General (CAG) might come out with a large notional loss number. But industry e xperts feel backloading premium might not be a good idea particularly if the present concessionaire wants to exit the project later. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHt0f5s2I-4jJrLvP507yNIZDYZdw&url=http://profit.ndtv.com/news/economy/article-road-ministry-likely-to-relax-premium-payment-norms-320466

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