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<p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The recommendations of the Rangarajan Committee on the highways sector are expected to prevent road projects from turning into non-performing assets for banks, National Highways Authority of India Chairman RP Singh said.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&ldquo;If we have to describe the impact of this decision in one sentence, it actually amounts to giving precedence to the debt service obligation over the premium payable to NHAI. It is hoped that due to this dispensation, none of the two to four-lane projects would now have the apprehension of becoming NPAs&rdquo;, Singh told.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">If the committee&rsquo;s recommendations are accepted, a share of toll revenues from road projects will first go towards loan repayment, and only then towards paying premium to the Government.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">This is not the case now.&nbsp;</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Premium is the amount that a road developer is supposed to pay the Government for the right to develop a road and collect toll from users.</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial"><strong>Premium picture</strong></span></span></span><br /> <span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">In specific terms, the committee&rsquo;s recommendations will help 32 ongoing road projects in the four&nbsp;laning and the six&nbsp;laning segments. In the yet-to-start projects, some of the 10 four&nbsp;lane projects will benefit and use the recommendations to tide over their stressed projects.&nbsp;</span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">But, the NHAI Chairman said it is not certain whether four to six-lane projects &mdash; a segment that includes the largest road project undertaken by GMR &mdash; will benefit.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">Rangarajan has submitted his recommendations on the issue of deferring premium payment for road projects. Though repayment of loans will get precedence over premium payment, Singhs said , &ldquo;NHAI can derive comfort from the fact that there is enough meat available in the projects after the debt obligation is over and it would be able to recover its premium over a period of time with interest.&rdquo;</span></span></span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">&ldquo;This benefit is passed on to the concessionaire with a stringent condition that any surplus amount over and above what is required to service the debt and meet the operation and maintenance expenditure would be passed on to the NHAI as premium and no dividend would be allowed to be declared until the shortfall in premium up to that point is made good,&rdquo; said teh NHAI chairman.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">&ldquo;As per the Rangarajan Committee report, which is likely to be accepted, 21 ongoing two to four-lane projects would benefit from this. Some of the leftover projects may now get started,&rdquo; he said.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The total annual premium payable in these 21 projects is around INR 729 crore.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">The overall premium of these projects over the concession period (which could range from 20-30 years) is INR 28,577 crore, said the NHAI Chairman.</span></p> <p style="text-align:justify"><span style="color:#696969"><span style="font-size:11px"><span style="font-family:arial">The 11 ongoing four to six-lane projects would also benefit in the same manner. The total annual premium involved in these projects is INR 1,159 crore. The overall premium of these projects over the concession period is INR 50,644 crore,&rdquo; added Singh.&nbsp;</span></span></span><span style="color:rgb(105, 105, 105); font-family:arial; font-size:11px; line-height:1.6em">&ldquo;It is, however, not certain whether there is enough incentive to convert four to six-lane projects that have not (yet) started,&rdquo; said Singh.</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>