A Letter Of Major Awareness On the Market Admist COVID-19: Informative & Uplifting!

Shri Narendra Modi
Hon’ble Prime Minister of India
Government of India
Prime Minister’s Office
Raisina Hills, South Block
New Delhi – 110011

Respected Sir, 

Immediate Measures to stabilize the Road Sector to cope with the COVID-19 induced disruption

Although the lockdown is temporary, the economy will take some months to recover from this disruption. The road sector will be no exception. Therefore, at this juncture, we need to take into consideration measures on how best to ameliorate the stress that the concessionaires / contractors are facing. With the lockdown impacting the cash flow from road projects severely, the need of the hour is to provide the concessionaires / contractors with enough liquidity so that they can meet their working capital requirements and take care of other short-term needs. Some other regulatory and administrative reforms are also needed to ensure a sustained growth of this sector over the medium to long term.

As a financier in road sectors, I would like to take this opportunity to share the following suggestions on how to mitigate the stress of the road sector borrowers:

Liquidity measures

• Government should advise all central and state government agencies (NHAI and others) to expeditiously clear all outstanding payments to concessionaires / contractors and construction companies
• Huge sums of money are stuck in arbitration awards given for several projects against NHAI and other agencies which have been dragged into the higher courts, leading to inordinate delays. Government should honour the arbitration awards and instead of further litigation, release the payments against the awards
• 75% of payments against awards should be made without requirement of Bank Guarantee
• For easier exit route, a strict time bound approval mechanism (say within 30 days) should be in place; authority’s failure to clear the application within the stipulated time should be considered as ‘deemed approval’
• Provide additional credit to concessionaires / contractors at concessional rates during the lockdown & 3 months thereafter either from banks or from a special fund

Regulatory measures

• NHAI can grant suo-motu extension of concession period to concessionaires / contractors for highway projects for appropriate periods as toll collections have stopped
• In the event of the concessionaire / contractor not being able to service project loan during or even beyond the lockdown, banks, in consultation with the borrower, should re-work the terms of the loan and its repayment schedule on the basis of future cash flows,so that projects do not come to a standstill destroying jobs and capital. At the same time, the account should remain a ‘standard asset’ in the banks’ books to preserve the rating of the concessionaire / contractor

Administrative measures

An on-line mediation forum be created to expedite:

• settlement of NHAI-related disputes
• clearance of pending approvals

Sir, we urge you to kindly consider our suggestions. In these extra-ordinary times, we need to explore all possible conventional and unconventional measures to ensure that the road sector remains viable.

With warm regards,

Yours sincerely, 

Hemant Kanoria
Chairman
Srei Infrastructure Finance Ltd.