Highway projects worth Rs 67,000 cr at risk, says Crisil

NEW DELHI: A report by Crisil Ratings today said around 7,500 km of highway projects, including 5,100 km under construction and 2,400 km operational are under high risk. These projects were awarded mostly between fiscals 2010 and 2012 on a build, operate, transfer, or BOT basis.

Tribune News Service

New Delhi, October 6

A report by Crisil Ratings today said around 7,500 km of highway projects, including 5,100 km under construction and 2,400 km operational are under high risk.

These projects were awarded mostly between fiscals 2010 and 2012 on a build, operate, transfer, or BOT basis.

About 5,100 km of under-construction highway projects are worth Rs 67,200 crore while 2,400 km operational BOT projects are worth Rs 25,800 crore.

The report says that around 50% of the projects under construction are at high risk of not being completed because of significant cost overruns and weak wherewithal of sponsors.

“We believe the remaining will benefit from proactive moves by the government to facilitate right of way and other clearances. We find the recent government move to ensure 80% right of way, or ROW, before a project is awarded very constructive”, the report said.

Sudip Sural, senior director, Crisil Ratings said under-construction projects require equity and cost-overrun support of around Rs 28,500 crore over the next two years.

Of this, about Rs 16,000 crore could be stumped up from internal accrual of sponsors and sale of stake at the special purpose vehicle level. That leaves a significant shortfall of Rs 12,500 crore, he added.

As for operational highways, 26 out of the total 80 are in no position to service debt on their own because of lower-than-estimated traffic. These projects, which are mostly toll-based, span about 2,400 km, or 40% of total length of operational BOT highways, and have an outstanding debt of Rs 17,100 crore.

Operational highway projects have been facing cash-flow mismatches in the past few years because of lower-than-estimated traffic volume, and interest rates that were on the ascend till 2014.

Sushmita Majumdar, director, Crisil Ratings, said: “In the next two years, these projects require a toll revenue growth of 40% in order to service their debt obligations. That’s a tough task considering that toll rates are linked to WPI inflation, which is in negative territory. And traffic has just started to inch up and is yet to reach double digits in most cases.”