It’s time NHAI got its act to­gether

Ju­di­cial ac­tivism, re­duced lend­ing by fi­nan­cial in­sti­tu­tions and lack of in­ter­est by de­vel­op­ers are some of the other chal­lenges

HT Estates - - FRONT PAGE - Van­dana Ram­nani

Be­sides the de­lay in ex­e­cu­tion, the other chal­lenges that the Na­tional High­ways Au­thor­ity of In­dia faces have to do with pub­lic ag­i­ta­tion in the event of toll be­ing levied on new high­ways, ju­di­cial ac­tivism, re­duced lend­ing by fi­nan­cial in­sti­tu­tions de­spite the Re­serve Bank of In­dia des­ig­nat­ing lend­ing to this sec­tor as “se­cured loans” and the most im­por­tant avail­abil­ity of eq­uity for in­fra­struc­ture projects, the NHAI white pa­per states.

Open tolling

Ex­cept for a few, vir­tu­ally all the tolled stretches are un­der open tolling (not ac­cess con­trolled). Vil­lagers of­ten cut pas­sages through the medium to go to the other side. Traf­fic en­ter­ing from side lanes dis­rupts the or­derly flow of traf­fic on the high­way.

Many cases have been re­ported where the vil­lagers use the wrong side of the high­way for ply­ing their ve­hi­cles. Slow mov­ing ve­hi­cles dis­rupt traf­fic and in­crease the po­ten­tial for ac­ci­dents.

There’s also the chal­lenge of toll col­lec­tion due to pub­lic ag­i­ta­tion in some projects. Though not wide­spread this in­creases the risk pro­file of road projects re­sult­ing in sub op­ti­mal bid re­al­i­sa­tions.

Fi­nanc­ing im­ped­i­ments

Lack of eq­uity with de­vel­op­ers: Most real es­tate com­pa­nies are pre­dom­i­nantly fam­ily-con­trolled business en­ti­ties, hav­ing low cap­i­tal base. The spe­cial pur­pose ve­hi­cle (SPV) struc­ture of project ex­e­cu­tion, manda­tory in the build op­er­ate trans­fer model (BOT), of­ten masks the real avail­abil­ity of cap­i­tal with the de­vel­op­ers. More of­ten debt by the de­vel­oper is used to sub­scribe to the eq­uity of the SPVs. The eco­nomic down­turn seen in the last few years has caused rev­enue re­al­i­sa­tion at much lower rates.

“M a n y d e ve l o p e r s h a d as­sumed higher rev­enues and had un­der­taken cor­re­spond­ingly high level of eq­uity obli­ga­tions. As the rev­enues crashed the avail­abil­ity of the eq­uity even to meet ex­ist­ing com­mit­ments be­came in­ad­e­quate, and none were left for fu­ture projects. Hence many projects un­der BOT went with­out elic­it­ing re­sponse from bid­ders,” says the white pa­per, adding that, hav­ing an­tic­i­pated high lev­els of rev­enue growth, many de­vel­op­ers had un­der­taken fu­ture obli­ga­tions which had over­lever­aged their bal­ance sheets.

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