NHAI to rework on model concession agreement

01 Aug 2013 Editorial Team

The National Highways Authority of India (NHAI) plans to rework the model concession agreement (MCA) for highway projects that was redrafted just three years back after road developers sought changes to the model agreement amid a slowing economy. NHAI had asked developers, lenders, consultants and industry bodies to give their feedback on the current model concession agreement in the context of the changed economic scenario, said a senior official at NHAI.

NHAI has received suggestions, including making lenders a party to the concession agreement that currently is between the concessionaire and NHAI, enabling quicker equity transfer, updating the total project cost at the time of inviting bids and a mechanism to address cost escalation after signing the concession agreement.

The last time changes were made to the model concession agreement for highway projects was in 2009, in line with recommendations of the BK Chaturvedi Committee. Other suggestions include assigning the official date for the commencement of a project, or the so-called appointed date, after environmental clearances are in place, at least 80 per cent of the land required is acquired and the concessionaire has tied up required funds.

What is happening now is that though the agency acquiring land gets legal right for buying land from the owner till the appointed date, many times it has been seen that hurdles arise during the actual change of hands i.e. paying of the compensation. So, actually land is not available for construction. It is now being suggested to give the appointed date only after the compensation has been paid and physically the land is handed over.

After the preparation of a note incorporating the suggestions, the NHAI will take it to an inter-ministerial group for discussing the rationale for the changes requested.

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