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Rediff.com  » Business » Road panel says NHAI loans should get govt guarantee

Road panel says NHAI loans should get govt guarantee

September 04, 2009 03:39 IST
The B K Chaturvedi committee set up to recommend ways to implement road projects faster and more efficiently, has recommended that the National Highways Authority of India be given sovereign guarantees on the loans it raises from the market.

The move, if the government agrees to it, would reduce the interest that NHAI pays on long-term borrowing by at least 2 percentage points, its officials said. The authority borrows money to finance road projects under an annuity scheme in which contractors build roads for NHAI, which pays them once in six months till the project is complete. NHAI recovers its investments through tolls in such projects.

"We get short-term loans at a rate of 8 per cent from banks, which will not change. But long-terms loans, which attract an interest rate of 11.5 to 12.25 per cent, is estimated to come down to 9.5 to 10.5 per cent," said a senior NHAI official.

A sovereign guarantee will also make it easier for NHAI to raise loans from international organisations, the official added.

The committee, which submitted the first part of its report to the prime minister last week, has also recommended giving the road transport authority more powers and flexibility to modify the model concession agreement that defines the details of bidding in a public private partnership (PPP) project. As of now, any change in the documents is done in coordination between the Planning Commission and the finance ministry.

Prime Minister Manmohan Singh set up the committee under Planning Commission member B K Chaturvedi to resolve various issues leading to delay in road projects. The committee also comprised Finance Secretary Ashok Chawla and Road Secretary Brahm Dutt.

The committee will shortly begin work 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.

Mihir Mishra
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