NHAI To Revise MCA’s: Move To Facilitate Stalled Projects

The National Highway Authority of India (NHAI) is trying to push the halted infrastructure projects that were stuck due to various reasons, such as delay in government clearances, delayed payments etc. The NHAI body is responsible to develop, maintain and manage the national highways of India and in order to set the ball rolling, NHAI is seeking to change the Model Concession Agreement (MCA). The MCA forms the gist of the public private partnership agreement in India and stipulates policy and regulatory framework for the projects.

Under the current MCA there are problems such as disputes arising due to cost escalations. Various related parties such as concessionaire, lenders and industry bodies have also made a request to make changes to facilitate the stalled projects. A concessionaire is a person/entity who operates a business within a premise which belongs to someone else. This will be one of the steps to kick start the halted infrastructure projects.  As many as 21 projects worth Rs 25000 crore have failed to attract bidders in last few years. The change in the agreement is expected to attract bidders for the highway projects. 

In the month of May 2014, NHAI has cleared nine projects for which there is a deferment Rs 5959.93 crore, of which Rs 651.30 crore will be in 2014-15. The period of deferment will be up to 2026-27 from 2014-15. Lenders will benefit from this move as debt obligation will now get a priority over premium payable to NHAI. The deferment will be limited to actual revenue shortfall after meeting the debt obligation and operational expenditure. Further, with this move the concessionaire will be required to share the toll rates with NHAI.  The companies involved in the above mentioned nine projects are Sadbhav engineering, Larsen & Toubro, IRB, Reliance Infra and DLF.

As per the latest data by NHAI, there are 140 contracts; measuring 3266 km that were under implementation. The length to be awarded by NHAI in future is to be 15593 km. The awarded cost of contracts under implementation or BOT grant annuity payment is Rs 35820 crore.

The new government’s emphasis is on reviving the economy for which infrastructure development is of paramount importance. Moreover, the NHAI’s initiatives and Nitin Gadkari, Minister of Road Transport and Highways, assurance to boost the roads and highways halted projects look to be brighter for the infrastructure sector.