Road Ministry to oppose a rise in project lending rates
ROADS & HIGHWAYS

Road Ministry to oppose a rise in project lending rates

According to a senior official, the Ministry of Road Transport and Highways intends to maintain current project financing lending rates while soliciting feedback from all relevant parties about the possible consequences of draft guidelines put forth by the Reserve Bank of India (RBI). The ministry will push the central bank to make sure that the nation's infrastructure development does not suffer in terms of cost or speed, and it will oppose any modifications to the rules that would result in higher loan rates. In its capacity as a regulator, the RBI will need to strike that balance to prevent the financial sustainability of road projects from suffering. Earlier this month, the central bank recommended stricter guidelines, mandating that lenders set aside 5% of the project loan amount as general provisions throughout the building phase?an increase from the current 0.4% provisions. To confirm the ministry's perspective on the draft plan, the National Highways Authority of India (NHAI), which is a part of the road ministry, met with members from the National Highway Builders Federation (NHBF) for the first time. More discussions are anticipated in the next few days. According to those with knowledge of the discussions, highway builders believe that the RBI's proposed 5% provision will result in a major increase in the financial burden on organisations responsible for carrying out highway infrastructure projects. This would make it more difficult for finance to reach worthy organisations and people, which would eventually impede economic growth and the development of vital infrastructure projects.

According to the NHBF, agencies may face difficulties because of the strict deadlines for meeting provisioning requirements and funding cost overruns resulting from extensions of the date of commencement of commercial operations (DCCO). This is especially true for infrastructure projects with different timelines and levels of complexity.

In order to give agencies more time to get used to the new provisions and prevent unforeseen financial difficulties, it has proposed a phased approach to the provisioning needs. In order to assist highway builders in streamlining the reporting process without placing undue administrative costs on them, NHBF has also encouraged the central bank to reconsider the terms and circumstances for supporting cost overruns and has requested more clarity in the disclosure requirements.

According to a senior official, the Ministry of Road Transport and Highways intends to maintain current project financing lending rates while soliciting feedback from all relevant parties about the possible consequences of draft guidelines put forth by the Reserve Bank of India (RBI). The ministry will push the central bank to make sure that the nation's infrastructure development does not suffer in terms of cost or speed, and it will oppose any modifications to the rules that would result in higher loan rates. In its capacity as a regulator, the RBI will need to strike that balance to prevent the financial sustainability of road projects from suffering. Earlier this month, the central bank recommended stricter guidelines, mandating that lenders set aside 5% of the project loan amount as general provisions throughout the building phase?an increase from the current 0.4% provisions. To confirm the ministry's perspective on the draft plan, the National Highways Authority of India (NHAI), which is a part of the road ministry, met with members from the National Highway Builders Federation (NHBF) for the first time. More discussions are anticipated in the next few days. According to those with knowledge of the discussions, highway builders believe that the RBI's proposed 5% provision will result in a major increase in the financial burden on organisations responsible for carrying out highway infrastructure projects. This would make it more difficult for finance to reach worthy organisations and people, which would eventually impede economic growth and the development of vital infrastructure projects. According to the NHBF, agencies may face difficulties because of the strict deadlines for meeting provisioning requirements and funding cost overruns resulting from extensions of the date of commencement of commercial operations (DCCO). This is especially true for infrastructure projects with different timelines and levels of complexity. In order to give agencies more time to get used to the new provisions and prevent unforeseen financial difficulties, it has proposed a phased approach to the provisioning needs. In order to assist highway builders in streamlining the reporting process without placing undue administrative costs on them, NHBF has also encouraged the central bank to reconsider the terms and circumstances for supporting cost overruns and has requested more clarity in the disclosure requirements.

Next Story
Building Material

Centre Plans Easier Green Clearances for New Airports

The central government is preparing to streamline environmental clearance procedures for airport projects to accelerate infrastructure development across the country. According to officials, the Ministry of Civil Aviation (MoCA) is working with the Ministry of Environment, Forest and Climate Change (MoEFCC) to establish a single-window mechanism for faster approval of greenfield and brownfield airports. The proposal seeks to reduce the time required for obtaining environmental clearance by simplifying inter-ministerial coordination and standardising assessment parameters. The move is part of ..

Next Story
Building Material

Beer Makers Urge Import Relaxation Amid Aluminium Can Shortage

India’s domestic beer manufacturers have urged the government to relax import rules and cut duties on aluminium cans as the industry faces a severe shortage of packaging material. The shortage, driven by rising demand and limited local supply, has disrupted production schedules for several breweries. Industry representatives have written to the Ministry of Commerce and the Ministry of Finance, seeking temporary relief through faster import approvals and reduced customs duties. They warn that the situation could impact the availability of beer across key markets during the festive season. A..

Next Story
Building Material

India Surpasses Japan as World’s Third-Largest Auto Market

India has overtaken Japan to become the world’s third-largest automobile market, marking a major milestone for the country’s manufacturing and mobility sector. Union Minister for Road Transport and Highways, Nitin Gadkari, credited the achievement to India’s growing production capacity, rising domestic demand, and sustained policy support for localisation and innovation. The country’s vehicle sales and manufacturing output have surged in recent years, positioning it just behind China and the United States. According to industry estimates, India’s automobile sector supports over 3..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?