Highway contractors demand infra loan provisions fixed at 2%
ROADS & HIGHWAYS

Highway contractors demand infra loan provisions fixed at 2%

Instead of the 5% that the Reserve Bank of India had proposed, highway construction contractors proposed fixing the provision that lenders must make against funding their projects at 2%. They said that this would negatively impact the viability of the projects. Lenders are currently required to reserve 0.4% of loans made for highway construction. The new draft rules on infrastructure funding by the banking regulator propose a significant rise in this.

Additionally, the contractors have urged that the government consider 90% of the available land for financial closure rather than the 50% that was originally indicated and that the repayment moratorium be extended from the six months that the RBI had advised to a year.

The National Highways Builders Federation (NHBF) stated in its submission to the National Highways Authority of India, the finance ministry, and the Reserve Bank of India that increasing the provisioning from 0.4% to 5% would pose the greatest challenge to project viability. They explained that this increase in provisioning would lead to higher interest costs, subsequently raising the overall project expenses for both investors and the government.

Additionally, the federation mentioned that they believed implementing a 2% provisioning could be accomplished more swiftly by 2025?26, as opposed to waiting until 2026?27 for the phased implementation of 5% proposed by the RBI.

Regarding the availability of land for the financial closure of infrastructure projects, the NHBF suggested that a land availability of no less than 90% should be deemed sufficient. They emphasised that land availability presents the most significant risk factor, often causing delays or even project terminations.

Furthermore, advocating for an extension of the moratorium period to one year, the NHBF argued that this period is frequently utilised by borrowers to meet initial cash flow needs for stabilising operations. They cautioned that restrictions on this period could strain the company's cash flow and potentially stress the project, especially concerning build-operate-transfer projects.

Instead of the 5% that the Reserve Bank of India had proposed, highway construction contractors proposed fixing the provision that lenders must make against funding their projects at 2%. They said that this would negatively impact the viability of the projects. Lenders are currently required to reserve 0.4% of loans made for highway construction. The new draft rules on infrastructure funding by the banking regulator propose a significant rise in this. Additionally, the contractors have urged that the government consider 90% of the available land for financial closure rather than the 50% that was originally indicated and that the repayment moratorium be extended from the six months that the RBI had advised to a year. The National Highways Builders Federation (NHBF) stated in its submission to the National Highways Authority of India, the finance ministry, and the Reserve Bank of India that increasing the provisioning from 0.4% to 5% would pose the greatest challenge to project viability. They explained that this increase in provisioning would lead to higher interest costs, subsequently raising the overall project expenses for both investors and the government. Additionally, the federation mentioned that they believed implementing a 2% provisioning could be accomplished more swiftly by 2025?26, as opposed to waiting until 2026?27 for the phased implementation of 5% proposed by the RBI. Regarding the availability of land for the financial closure of infrastructure projects, the NHBF suggested that a land availability of no less than 90% should be deemed sufficient. They emphasised that land availability presents the most significant risk factor, often causing delays or even project terminations. Furthermore, advocating for an extension of the moratorium period to one year, the NHBF argued that this period is frequently utilised by borrowers to meet initial cash flow needs for stabilising operations. They cautioned that restrictions on this period could strain the company's cash flow and potentially stress the project, especially concerning build-operate-transfer projects.

Next Story
Products

Premium Coverage

Nova 125 Premium Gypsum Plaster by Walplast offers 25 per cent more coverage at 125 m² per tonne, ensuring faster application and a flawless finish. With high whiteness, strength, crack resistance, and eco-friendly natural gypsum, it delivers durable, efficient, and sustainable wall solutions.Company: Walplast  Website: https://www.walplast.com/ ..

Next Story
Products

Noise Blocker

M.A.D is a flexible, lead-free, high-density acoustic barrier that blocks low-frequency vibrations and noise, ideal for walls, ceilings, and floors in offices, hotels, gyms, studios, and industrial spaces. Available in 2mm–6mm variants.Contact: TIKIDANWebsite: https://tikidan.in/ ..

Next Story
Infrastructure Urban

India’s Rs 370 Bn Petrochemical Expansion to Shift Asian Supply

India’s planned investments worth over USD 37 billion (around Rs 3 lakh crore) in the petrochemical sector are poised to reshape Asia’s supply landscape, according to a new report by S&P Global Ratings.The report noted that India’s drive toward petrochemical self-sufficiency mirrors China’s earlier expansion and could intensify competition in the region. “India’s capacity additions will significantly alter trade flows and increase competition among Asian producers,” said Ker Liang Chan, credit analyst at S&P Global Ratings.S&P estimated that public sector enterprises ..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?