HAM gains traction with investors
Apr 21 2017 , New Delhi
Sources said the government agency NHAI has awarded highway projects worth 2,500 km in 2016-17; nearly double the length it auctioned in 2015-16.
The growing investors’ interest assumes significance given that banks were initially reluctant about lending to HAM projects.
The ministry of road transport and highways and its agencies together awarded projects 10,001 km in 2015-16. Of this, 4,344 km long were auctioned by NHAI.
The road ministry’s implementing agency had awarded about 1,200 km under HAM in 2015-16 while the rest were auctioned for construction on EPC basis.
Given their mixed experience with BOT model, banks have been wary of lending to HAM projects. In February, banks led by SBI had stated their reluctance to fund HAM projects at a closed-door meeting with transport minister Nitin Gadkari, citing uncertainty over getting their money back.
If a road project were terminated after completion of 40 per cent work, there would not be any repayment to banks, as per the HAM guidelines. Even if the project were terminated after completion of 85 per cent work, lenders would get back just 65 per cent of the loan, analysts said. Developers’ low equity risk also added to bankers’ concerns.
As of March this year, 17 out of 26 projects awarded under HAM have achieved financial closure. The government introduced this model in January 2016 to ensure implementation of highway projects not found viable on (BOT) basis.