FM clears policy to defer premium payment by road developers - Angel Broking

The Finance Ministry has accepted Rangarajan Committee's suggestion to reschedule premium payment for highway projects. The approval is effective from Wednesday itself. Highway Ministry and the National Highways Authority of India (NHAI) will examine each project on case-to-case basis now. According to RP Singh, Chairman NHAI, this move is likely to benefit 21 highway projects.

The new norms allow stressed projects to avail revenue-shortfall loan clause in the model concession agreement. The shortfall between the toll revenue collected by the developer and the expenses incurred, which includes operational and maintenance costs, debt servicing and premium payments, will be extended as a loan to companies seeking rescheduling. The developer will have to pay interest equal to bank rate plus 2% on premium amount deferred. The project developer will have to clear the premium deferred over the years before its concession period gets over. The recommendations also propose penalty for projects delayed due to project developer's fault. According to RP Singh, the new norms are expected to benefit projects which have already started and are having difficulty in servicing debt. They can now service debt fully since it will be given priority over premium.

The new norms are a step in positive direction and companies such as Gammon India, Ashoka Buildcon, IVRCL, GMR, GVK, among others are expected to benefit from the move.

Source : Equity Bulls

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