Cash-strapped highway developers may be permitted by the Union government to exit projects at any stage after financial closure if lenders agree to change the concessionaires at the request of the existing developer. The Surface Transport Ministry feels that this could be a shot in the arm for stalled highway projects since equity released from old projects can be used to develop new ones, and companies with relevant expertise can take over the construction or operation and maintenance of the existing ones.
The Road Ministry is now tweaking its equity takeout proposal to incorporate suggestions received in a meeting with the Finance Ministry and Planning Commission on June 3.
The proposal is part of the Road Ministry's note to allow developers to fully exit projects which is restricted under the current concession agreement for Public Private Partnerships (PPP) in national highways. Right now, lenders' right to substitute concessionaires is a grey area in the model concession agreement (MCA) because it doesn't specifically rule out lenders from changing concessionaires in a project even before a default, said officials in Road Ministry.
The Ministry is working around that to incorporate a harmonious process where a concessionaire wanting to exit a project can approach the lenders, the officials said. At present, MCA specifies that lenders can change developers in case of a financial default or when NHAI asks them to do so in case of a concessionaire default.