Priority tag push to ease fund access for road cos

NEW DELHI: Private highway developers may soon get more funds from banks as the road transport and highways ministry has proposed prioritysector status for the sector in a bid to tide over shortage of funds.

The ministry has set a target of building 7,000km of highways annually, requiring an investment of $70 billion in the next three to four years, with the private sector expected to provide about 60% of the investment. Speaking to ET, road transport and highways minister Kamal Nath said he had already discussed the issue of priority sector status for the roads sector at various levels. “We would be able to share more details on it later,” he said.

Existing guidelines mandate that at least 40 per cent of net bank loans be earmarked for certain designated sectors, which include exports, housing, rural and agriculture sectors.

The minister said he did not want the priority sector status for the roads sector to hurt other segment which are already eligible for priority lending.

Several private road development firms are facing shortage of cash and are struggling to achieve financial closure. The companies would need far more finance in days to come as the government plans to bid out a large number of projects in the next few months.

Feedback Venture managing director (transportation division) Parvesh Minocha said that priority sector status would increase the availability of fund to developers besides reducing the cost of money. “It will also bring down the risk involved,” he added.
In order to achieve its target of building 20km of roads per day, the government wants to award contracts for nearly 12,000km of highways in the next couple of months.

The government has made the bidding criteria more investor-friendly to attract private investment in the sector. It has relaxed the restrictions on cross-holding between developers bidding for a project by raising the cap to 25% from the current limit of five per cent.

The change in cross-holding norms allows a firm to bid for more than one project. The clause earlier barred partners of a special purpose vehicle (SPV) from bidding for a project in case of a common shareholder with higher than 5% direct or indirect ownership.