Banks Say they’re Not Willing to Fund Roadworks Under Hybrid Annuity Model
Uncertainty over getting back the money loaned lingers
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