Buying and selling road projects in India just got easier. On 9 September, the National Highways Authority of India (NHAI) issued a circular relaxing the equity lock-in restrictions for concessionaires for its build-operate-transfer (BOT) projects. This new policy allows concessionaires to completely divest their equity from road BOT projects two years after the completion of construction provided that their divested equity is:
- Reinvested in incomplete NHAI projects;
- Reinvested in other highway projects;
- Reinvested in power projects; or
- Used to retire debt owed to financial institutions in road or other infrastructure projects.
The past several years have seen few bids for public-private partnership projects in India, in part because of the lack of available equity.
During 2014-15, roads in India were built at an unimpressive 12 kilometres per day, against the targeted 17 km/day. Despite not meeting this target, the Ministry of Roads, Transport and Highways’ projected average of close to 30 km/day for 2015-16 is nearly double the previous year’s target. While this projection is ambitious and may be difficult to achieve, the new policy should help in freeing locked-in equity and increasing interest in the sector.
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Akshay Jaitly is a partner at Trilegal and Samkit Sethia is an associate. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad.
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