New Delhi: The government Wednesday allowed developers to divest 100 percent equity in projects two years after the completion of such schemes, a move that can unlock investments worth about Rs 4,500 crore in the sector.
The decision is aimed at fast-tracking contracts and implementation of highway projects in the country by making additional funds available for investment in projects.
"The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has amended its earlier approval dated May 13 for permitting 100 percent equity divestment after two years of construction/completion for all BOT projects, irrespective of year of award," an official statement said after the meeting.
The approval would allow the highway developers to use proceeds from the sale of divested equity in incomplete projects of NHAI or any other road projects besides any power sector projects or to retire their debt to financial institutions in any other infrastructure works, the statement said.
"This will result in physical completion of languishing infrastructure projects. This in turn will bring relief to citizens /travellers in the concerned area," it said.
It added that consequently, it will facilitate uplifting socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country. This will also lead to enhanced economic activity.
There are 80 such Build, Operate and Transfer (BOT) projects awarded prior to 2009 that have been completed and the locked in equity in these projects works out to approximately Rs 4,500 crore, an official said.
Once this amount is unlocked and re-invested in new projects, it could support 1500 kms of new highways on PPP mode reviving the response to BOT projects.
In May, the CCEA had approved this comprehensive "exit policy" and as per information the PMO had asked the Road Transport and Highways Ministry to work out a modality in which developers are encouraged to plough back the funds through divestment of equity in projects.
During the last few years, public-private partnership (PPP) projects have not been able to attract bids; one of the primary reasons being lack of availability of equity in the market among qualified bidders.
This move will help unlock equity from completed projects making it potentially available for investment into new projects, said the statement.
The CCEA in May had approved the proposal "to make applicable...The provision of Model Concession Agreement (MCA) pertaining to the exit option for selected bidder/consortium members together with its/their associates...To all BOT (Toll) and BOT (Annuity) projects awarded till September 30, 2009, with the modification that the equity so divested, be invested by the promoter(s), in their incomplete NHAI projects," the statement said.
It said the National Highways Builders Federation (NHBF), subsequent to the policy circular by NHAI, made a representation that all developers are not having incomplete highways projects, thus they are denied of this facility for no fault.
"Most developers in the infrastructure sector are carrying highly leveraged balance sheets at their holding companies level, as they have been simultaneously supporting various infrastructure Special Purpose Vehicles (SPVs) which are under severe stress," the statement said.
The NHBF also said these developers can be allowed to utilise funds so generated to reduce their existing corporate debt or for investment in any new infrastructure project that need not alone be highways projects, as most developers have multiple verticals in the infrastructure sector, it added.
NHAI after examining the representation of NHBF was of the opinion that full benefits of this policy can also be leveraged and hence the decision was taken, the statement said.
