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Relaxation in Exit provisions: Major fillip to the Cash strapped Road Sector
Jun 22, 2013

The Cabinet nod for the relaxation in exit provisions, which has been the long-standing demand from highway developers, is indeed a welcome step. Confederation of Indian Industry has consistently argued the need to derisk the sector through well directed policy measures from time to time.  

“Given the lack of developmental capital in the country, it is heartening that the government has allowed complete exit to developers any time after the financial closure for a project is achieved. This would allow early stage investors to plough back the released equity into the sector and will facilitate entry of long-term investors. However, investors would wait to see the detailed guidelines before committing themselves. A liberal regime which permits transfer of equity through bilateral negotiations with the consent of NHAI and lenders will help boost private investment", said Mr. Athar Shahab, Chairman, CII Core Group on Roads & Highways and CEO, Uniquest Infra Ventures Pvt. Ltd.


Under the existing norms in place since November 2009, developers must hold at least 26% of equity upto two years after the commercial operation date (COD) of projects. Moreover, developers of build-operate-transfer (BOT) projects awarded before 2009 don’t have the option to exit the project for the entire concession period.


“Lack of equity has severely affected many projects under execution. Bringing in substitutes will help in timely completion of such projects and also revive market position of the developers”, said Mr. Vinayak Chatterjee, Chairman, CII National Task Force on Infrastructure Projects- Monitoring & Advocacy and Chairman, Feedback Infrastructure Services Pvt. Ltd.


The move is definitely a part of series of measures planned by the government which would facilitate unlocking of funds currently tied in the project SPVs and enable long term strategic investors to bid for newer projects thus reinvigorating the growth momentum in the prestigious, flagship infrastructure development programme of the country.

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