The implementation of key policy reforms that include easing of the clearances process, ensuring 80 per cent land acquisition before the award of project, premium rescheduling, allowing developers to
The implementation of key policy reforms that include easing of the clearances process, ensuring 80 per cent land acquisition before the award of project, premium rescheduling, allowing developers to fully exit operational road projects, and introduction of the hybrid annuity model will nearly double highway road construction to more than 11 km by fiscal 2018 from the present 6 kms in 2016, an increase of 40 per cent.
However, as much as 4,600 km of projects are still in the high-risk category because delays in land acquisition and approvals have increased costs by 20 per cent or Rs 11,000 crore, and the financial health of sponsors remains weak.
The only solution is refinancing, debt restructuring, premium deferment or acquisition by a stronger sponsor says Crisil director Sushmita Majumdar.
The key reforms that are largely aimed at reducing risk, will see private participation set to pick up, said Ajay Srinivasan, director, Crisil research, which analysed 85 under-construction and 104 operational BOT (build operate and transfer) and annuity projects awarded by the National Highways Authority of India (NHAI). Together they span 16,600 km.
Within the 85 under-construction BOT projects, there has been a 10 per cent reduction.
The stuck projects were largely awarded during fiscals 2009-2012 and the mitigation options for them include a one-time fund infusion through NHAI loans, and a change in sponsor.
Crisil estimates that over the next two years, stronger developers will be able to raise funds for their under-construction portfolio through stake sales in their operational portfolio and from investment trusts.
However, weaker developers still face a funding gap of Rs 6,300 crore, equivalent to around three-fourth of funds required for their existing portfolio.
