Norms for highway projects pact changed

Mihir Mishra

The threshold limit in the conflict of interest clause in the model
concession agreement (MCA) for highway projects has been increased
from 5 per cent to 25 per cent, which was recommended by
the B K Chaturvedi Committee, set up to find ways to expedite
various road projects in the country.


This will allow any two special purpose vehicles (SPVs) with a common
partner having up to 25 per cent stake for bidding for the same project.

Earlier, any two SPVs in which any developer had more than 5 per cent
shareholding each were barred from bidding for the same project.
It was increased to 5 per cent in July this year from the earlier 1 per cent.

Among other recommendations which have been accepted are the
introduction of an ‘exit clause’, removal of termination clause,
no forfeiting of security money deposited by the bidders
if they are not present at the time of bid opening, and
constituting an empowered group of ministers to clear stalled projects.

The exit clause allows the lead partner in an SPV to exit by selling its
stake after the construction of the project is over.

Earlier, it was mandated to stay till the completion
of the concession period (ranging from 20 to 30 years).

The ‘termination clause’ allows NHAI to take back tolling
rights from a concessionaire anytime before the concession
period is over, if the concessionaire has recovered its investment on the project.

However, the Cabinet Committee on Infrastructure (CCI) has
sent back the recommendations on finances to the Planning Commission.

“The CCI did not accept the committee recommendations on the financing side.
All such recommendations have been sent back to the Planning Commission,”
said a source in the ministry, who did not wish to be named.

The committee’s recommendation on financing included providing sovereign
guarantees on loans that the National Highways Authority of India raises from the market.

Headed by Planning Commission member B K Chaturvedi, the committee
also comprises Road Secretary Brahm Dutt and Finance Secretary Ashok Chawla.

The committee will also begin working on the second part of the report.
This will deal with a new dispute resolution mechanism, providing financing
to road builders and making changes in the company law
to make the special purpose vehicles more powerful.