MoRTH to establish credit rating metric for private construction firms

06 Apr 2023 CW Team

Companies that build infrastructure must have a credit rating of "BBB" or above to be eligible to submit a proposal for national highway projects funded by public-private partnerships (PPPs).

Any bidder who wishes to make a bid for the project but does not have such a credit rating must include a "letter of comfort" from their bank or other financial institution.

The Union Road Transport and Highways Ministry has never previously established such a credit rating criterion for private construction companies.

The decision was made in response to concerns that contractors who were awarded projects under the Build Operate and Transfer (BOT-Toll) and Hybrid Annuity Model (HAM) were having trouble securing funding to begin construction, which delayed the project's implementation.

The investment grade rating of "BBB" means that there is little chance of default and that the ability to meet financial obligations is deemed sufficient. However, this capability is more likely to be hampered by unfavourable commercial or economic situations.

Due to financial difficulties faced by several highway builders, some projects have been postponed. The Highways Ministry recently stated in response to a parliamentary query that at least 10 projects were delayed owing to issues with contractors, six of which were related to contractors' financial difficulties.

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