NHAI kicks off arbitration claim settlement via reconciliation process

Nitin Gadkari, Road Transport and Highways Minister
The National Highways Authority of India (NHAI) has settled an arbitration claim worth about Rs 650 crore with Infrastructure Leasing & Financial Services (IL&FS) for nearly Rs 200 crore through a conciliation process. 

The NHAI decided to settle the claim for less than 70 per cent of the Rs 800-crore demanded by the company through an arbitration process, said an official. The NHAI had, in turn, asked for Rs 150 crore from the company, which worked out to a net outgo of Rs 650 crore.

This comes amid reports of the NHAI deciding to settle stuck projects through conciliation instead of taking the long road of arbitration. This would reduce the agency’s debt burden, which may reach Rs 2.5 trillion by the end of the financial year.

The settlement with IL&FS for four laning of Jorabat-Shillong (Barapani) section of NH-40 in Assam and Meghalaya on the design, build, operate and transfer (DBFOT) pattern under BOT (Annuity) was awarded to the concessionaire, IL&FS Transportation Networks. 

The project commenced on January 12, 2011, with the scheduled completion date of January 10, 2014. Owing to various reasons, work was delayed and a final commercial operational date was issued on January 30, 2019, the official said.

The agency had gone for arbitration before the arbitral tribunal in respect of certain disputes related to this project, such as loss on account of interest during construction, additional costs toward maintenance, loss of escalation, loss of revenue/annuities on account of delayed commercial operation, and certain additional work executed on ground to the tune of Rs 803.23 crore.

The NHAI also raised claims of Rs 145.33 crore, excluding interest, against the concessionaire on account of delays and other issues.

“Now the NHAI and the concessionaire through conciliation agreed to settle all the claims for an amount of Rs 197.62 crore,” the official added.

There would be an interest payment to the tune of Rs 54.53 crore equivalent for the settlement, which will take the final amount to Rs 252.13 crore payment to the concessionaire.

The conciliation exercise is being conducted by the NHAI to deleverage its balance sheet.

There are three committees on reconciliation set up by the NHAI to look into these claims. These comprise retired judges.

The road ministry issued a set of guidelines in March for reviving stuck national highway projects. According to the guidelines, a mutually agreed and executed agreement between the parties for projects awarded under the engineering, procurement, construction (EPC) mode that qualify as stuck could be reached in order to foreclose the disputes.

The NHAI has lined up a portfolio of projects worth Rs 18,000 crore to be bid out in the next few months, which includes five hybrid-annuity packages on the Vadodara-Mumbai Expressway, four EPC packages on the Delhi-Vadodara expressway, and projects in Uttar Pradesh and Bihar.

For the current financial year, the NHAI has the approval to raise Rs 75,000 crore in borrowings during the current year, while the government support is Rs 36,691 crore. In 2018-19 (FY19), a mix of debt raised from banks, toll revenue, and a road monetisation scheme was to yield Rs 62,000 crore to the NHAI.  This financial year, allocation has been made to the NHAI for major works under the Bharatmala Pariyojana. 

The money will come from the Central Road Infrastructure Fund, the Permanent Bridges Fee Fund, and Monetisation of National Highways Fund.

The Bharatmala programme envisages construction of 20,000 km of roads at an estimated investment of Rs 7 trillion.

While the overall allocation for NHAI has seen a rise in the past couple of years, the authority’s Internal and Extra Budgetary Resources (IEBR) has increased. 

In 2017-18, the NHAI’s IEBR was Rs 50,532.41 crore. It went up to Rs 62,000 crore in FY19 and further to Rs 75,000 crore in 2019-20.

The highways ministry is hopeful of receiving close to Rs 47,000 crore budgetary support in the upcoming Budget. This would be Rs 10,000 crore higher than the Rs 37,000 crore support that the ministry received last year. Besides the fiscal support, the NHAI has the mandate to raise Rs 75,000 crore during the current financial year.

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