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NHAI funding plan for road developers stuck

Plan stuck under the new policy that banks can recover some loans while providing funds

Policy Pulse
Publish Date: Sep 15 2016 11:34AM | Updated Date: Sep 15 2016 11:34AM

NHAI funding plan for road developers stuck

National Highways Authority of India (NHAI) plans to release Rs 6,000 crore to give a funding boost for the road developers so that projects can be completed on time.


Now the plan is stuck in litigation under the new policy announced at the end of last month that banks can recover some stuck loans while providing funds for stalled projects. 


Under the new guidelines cleared by the Cabinet Committee on Economic Affairs, government agencies will pay 75% of the arbitral amount to an escrow account against margin-free bank guarantee.


Niti Aayog, which piloted the new policy, has written to ministries and departments of governments to act on the decision quickly.


Government has asked its departments along with public sector entities to release 75% of disputed amount where the developer or concessionaire has won a negotiation case. 


At present, 123 dispute cases worth Rs 25,000 crore are pending with NHAI, including cases worth Rs 13,000 crore awarded in favour of private parties. 


"In overall cases that have gone against us, the amount has been Rs 13,000 crore. We have already cordially settled claims worth Rs 5,000 crore," a senior NHAI official said. 


"So, 75% of the remaining Rs 8,000 crore that has to be released under the new guidelines works out to be Rs 6,000 crore. We'll start paying that amount on case by case basis," he added.


The claims are related to around 20 companies. The payment process will be initiated as soon as the private party sends NHAI a letter.