Banks Say they’re Not Will­ing to Fund Road­works Un­der Hy­brid An­nu­ity Model

Un­cer­tainty over getting back the money loaned lingers

The Economic Times - - Finance & Commodities -

Mum­bai: Bankers led by State Bank of In­dia, the coun­try’s big­gest, have said they would not fund any road de­signed un­der the hy­brid an­nu­ity model (HAM) since there is un­cer­tainty about getting back their money. Lenders con­veyed this to Union Road Trans­port Min­is­ter Nitin Gad­kari last week at a closed-door meet­ing.

Speak­ing to ET on con­di­tions of anonymity, two se­nior bank of­fi­cials said that un­der the terms of agree­ment, if the road project is ter­mi­nated mid­way, the lenders will not be en­ti­tled to re­ceive the money they have lent. “If the road project is ter­mi­nated af­ter even 40% is com­pleted, there will not be any pay­ments to banks,” said a se­nior bank of­fi­cial. “Even if the pro- ject is ter­mi­nated af­ter be­ing com­pleted, they will give lenders 65% of the money lent. This is not ac­cept­able to us,” the of­fi­cial added.

Lenders have con­veyed that in such a sce­nario pro­moter’s con­tri­bu­tion 27 HAM projects Cost: ₹ 20,000 crore Dis­tance: 1,200 km has to be 40% and the amount has to come up front. Bankers said pro­mot­ers have been re­luc­tant to in­fuse higher cap­i­tal and their con­tri­bu­tion has been 20% to 25% for road projects. Lenders told Gad­kari that they are com­fort­able fund­ing road projects that are de­signed un­der EPC which is en­gi­neer­ing pro­cure­ment and con­struc­tion. Lenders have asked the road min­istry to come up with a work­able so­lu­tion. The govern­ment had in­tro­duced HAM, a com­bi­na­tion of EPC and BOT (Build, Op­er­ate, Trans­fer), to re­vive projects that were not found vi­able un­der the toll-col­lec­tion model. Ac­cord­ing to me­dia re­ports, 27 HAM projects cost­ing ₹ 20,000 crore have been awarded to build 1,200km of roads. Ac­cord­ing to bankers, Gad­kari dis­cussed the sta­tus of stalled road projects and ways to re­vive them. Me­dia re­ports said 13 BOT projects and 13 road projects un­der HAM were dis­cussed.

If the road project is ter­mi­nated mid­way, lenders will not be en­ti­tled to re­ceive the money they have lent Even if the project is ter­mi­nated af­ter be­ing com­pleted, govt will give lenders 65% of money lent Pro­mot­ers have been re­luc­tant to in­fuse higher cap­i­tal PROJECTS AWARDED

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.