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Cabinet Approves permission for 100% equity divestment for all BOT projects

The Cabinet Committee on Economic Affairs(CCEA) headed by the Prime Minister Narendra Modi has amended its previous approval of May, 2015 for permitting 100 percent equity divestment after two years of construction completion for all BOT projects, irrespective of year of award. After this approval promoters would be allowed to use sale proceeds of divested equity for the construction of incomplete National Highway Authority of India projects, any other highway projects, any other power sector projects and even to retire their debt to financial institutions in any other infrastructure projects.

Experts feel that this will result in completion of late infrastructure projects, which will bring relief to citizens  of the country. “The main object of the approval is to expedite award and implementation of highway projects in the country by making additional funds available for investment in projects,” says the government release. “Consequently, it will facilitate uplifting socio-economic condition of the entire nation due to increased connectivity across the length and breadth of the country. This will also lead to enhanced economic activity,” it added. 

More importantly CCEA in May 2015 approved of the proposal of the Ministry of Road Transport and Highways, to make applicable “mutatis mutandis” the provision of Model Concession Agreement (MCA) pertaining to the exit option for selected bidder and consortium members together with their associates. After this  National Highways Builders Federation (NHBF)has made a representation to the government in this regard. It said, "All developers are not having incomplete highways projects, thus they are denied of this facility for no fault. Most developers in the infrastructure sector are carrying highly leveraged balance sheets at their Holding Companies level, as they have been simultaneously supporting various infrastructure Special Purpose Vehicles (SPVs) which are under severe stress.” In this way the developers can be allowed to utilize funds so generated to reduce their existing corporate debt or for investment in any new infrastructure project. Crucially NHAI  is also of the opinion that full benefits of this policy decision can also be leveraged, if certain amendments are made to the above said decision

 

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