Taking steps to improve the speed of project restructuring, distributing project risks across stakeholders, slashing interest rates to make available cheaper finance are some of the major demands made by the infrastructure players with stakes in the highway sector for this Budget.
Finance costs account for a large portion of the project costs. On interest rates, L&T Infrastructure Development Project Ltd’s CEO and MD K Venkatesh said interest during construction can be 15-20 per cent of project cost. On commissioning the asset, interest is 50-70 per cent of toll revenues. Srei Infrastructure Finance’s CMD Hemant Kanoria also sought a 200 basis points reduction in interest rates. “There is a need to speed up restructuring of projects by identifying the underlying causes that are preventing projects from progressing — be it the lack of physical progress or of good project financials,” added Venkatesh.
There could be projects that have been commissioned, but rules of the game have changed due to factors beyond the control of investors. For instance, there could be a resistance to pay toll by the highway users, he added.
Banks’ appetite to lend has gone down as they perceive more risks in projects. Developers are pitching for a mechanism that makes government shoulder a higher share of risk for any delay in decisions such as timely land acquisition and utility clearances. In effect, if the project costs soar due to any such delays on government agencies’ part then the private developer should be accordingly compensated.
Major highway developers expect the project costs to go up due to the new land acquisition law. The Government has to find a way to ensure progress on all ongoing projects that are stuck due to land acquisition or delays in utility clearance, players assert.
Developing a long-term bond market by making available infrastructure investment trusts is another point on which the infrastructure developer has sought government initiative. There are also tax-related demands regarding minimum alternate tax and removing the cascading effect of dividend distribution tax.
Venkatesh feels there should be more public-funded projects.
However, the government has to take a call in view of the fiscal deficit. Funds to build highways are expected to go up with the Modi-led government imposing an excise duty on fuel, a move which is likely to mop up an additional ₹19,000 crore.
IL&FS Transportation Network Ltd has also recommended for setting up of an independent road sector regulator and clarity on its role.
Highway users pay toll charges of over ₹15,000 crore a year for using the national highways network. A regulator is expected to monitor the quality of service provided by the highway operator.
