25 national toll road projects with Rs 19,435 crore debt at risk from new economic corridors under Bharatmala
An assessment by ratings agency ICRA has found that atleast 25 BOT (Toll) and OMT national highway projects would be under risk of traffic diversion affecting their debt servicing ability, due to 44 economic corridors (EC) proposed under the Bharatmala Pariyojana.
The 25 projects have a debt of Rs 19,435 crore. The agency notes, "Bharatmala network is well thought through and definitely a step in the right direction, but is bound to impact the existing network by directly competing with a few stretches including some of the existing BOT (Toll) road projects." Read more
It states that, out of the 44 economic corridors, about 21 ECs would partially or fully affect the existing alignments while the remaining 23 corridors involve up-gradation of existing alignment thus will not result in any deviation from existing alignments.
Overall, as per ICRA’s analysis, there are 24 BOT (Toll) and 1 OMT road projects whose traffic could get affected due to the proposed ECs.
Shubham Jain, Vice-President & Sector Head, Corporate Ratings, ICRA, said, "The risk of traffic diversion is assessed based on the traffic mix, long distance traffic movement and key feeder routes. The traffic diversion risk for about 72% of the projects is low, while 16% of the projects have a moderate risk and the remaining 12% of the projects have high risk of leakage in traffic with the availability of an alternate route."
On remedial measures available with protection through the concession agreement Jain added, although article 30 of the concession agreement extends protection to the BOT toll road projects by restricting construction of additional tollway, this clause is not applicable if the length of such additional toll road exceeds the length of the existing route comprising the project highway by 20%.
The stretches under ECs of Bharatmala Pariyojana are either longer by more than 20% or traverse a new route completely and hence does not fit into the description of the additional tollways as defined in the concession agreement. Therefore, traffic loss or diversion arising out of these would not get compensated under the concession agreement, Jain said.
In extreme cases, the concessionaire may choose to opt for termination of the concession agreement by invoking authority event of default clauses. As it cannot be termed as Authority Event of Default, in most cases this may end up in dispute with Authority, or Authority in turn invoking Concessionaire Event of Default (which is the case with most of the terminated projects till now), Jain added.
The termination payment in case of concessionaire event of default is equivalent to 90% of debt due (here, debt due is calculated as if the capital cost was restricted to total project cost as per NHAI).
As per ICRA research, in around 40% of the total BOT projects, the debt sanctioned is higher than the total project cost allowed by NHAI resulting in shortfall in termination payments when compared to the actual debt due.
As per model BOT (Toll) concession agreement dated May, 2016; similar clauses were also available in earlier concession agreements.
- TradeBriefs Bureau -