News Detail

<p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Highway Authority NHAI today found support from India Ratings which said the fears expressed by it are well&nbsp;founded as the recommendations by the Rangarajan panel on financial support to the ailing road operators may not provide any substantial relief to them.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;The recommendations stipulated by the Rangarajan committee to defer premia for ailing projects may not necessarily provide substantial relief.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">In addition, the revenue shortfall loans proposed by the committee may not be viable for projects that have fixed revenue share or premium arrangements,&quot; the rating agency said.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;Even with a reasonable 9 per cent annual revenue growth rate assumption, the revenue shortfall loan might not get fully recompensed by the end of the concession period.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">Needless to state that the actual return on equity would be much below expectations, which, as feared by NHAI (National Highway Authority of India), would diminish private sector interest in the sector,&quot; it added.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The agency said if the finance ministry approves the recommendations then it would only aggravate the situation.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;On the one hand, the projects are saddled with a much higher financing cost as compared to management&#39;s estimates at the time of bidding. On the other hand, the actual traffic and the revenue earned from it have fallen below expectations, compelling road developers to turn to external support to meet debt obligations,&quot; the report said.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">It added that many developers have had to reschedule or restructure their existing debt.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;The tight amortisation schedule and the fixed nature of premiums offer little headroom to absorb even modest stress in traffic growth.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&quot;This is because, the bids to secure these highway projects were based on aggressive assumptions of traffic growth, which may not materialise given the prevalent slow economic growth. Hence restructuring the premium payment schedule becomes necessary,&quot; the rating agency said.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">However, it added whether back-ending the premiums alone would offer long-term relief to the ailing projects, is need to be seen.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Source-On Request</span></span></span></p>