The move, aimed at fast-tracking contracts and implementation of highway projects by making additional funds available, is expected to unlock investments worth Rs 4,500 crore in the sector
New Delhi : The Cabinet Committee on Economic Affairs on Wednesday allowed developers to divest 100 per cent 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 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, an official statement said after the meeting.
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.
Construction of road takes around three years on an average, depending on the length and terrain of respective projects.
Significantly, the respective developers would now be permitted to invest their free equity in other highway projects, power sector projects, or even to retire their debt to financial institutions in any other infrastructure projects.
Earlier, the freed equity was only allowed to be invested in other National Highway Authority of India projects. The pace of award of contracts had slowed down due to paucity of funds, with several projects stuck for long periods pending regulatory clearances.
“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.
