NHAI offers 'COVID loan' to private operators at 2% more than bank rate

The NHAI will disburse 'COVID-19 loan' within 60 days of receiving a valid request from the concessionaire. The loans will be granted only to those parties who are not in default of contractual obligations as on February 19, 2020

KEY HIGHLIGHTS:

• NHAI offers COVID-19 loan to toll operators to help them tide over coronavirus crisis
• An interest rate of 2% above bank rate would be charged on the loans extended to private operators
• Concession period for toll collection would be extended by number of days for which toll collection remained suspended
• NHAI had ordered suspension of toll collection from March 26 to April 19

In a much needed relief for highway developers, National Highways Authority of India (NHAI) has offered COVID-19 loans to help them tide over coronavirus crisis.

An interest rate of 2 per cent above the bank rate would be charged on the loans extended to private operators. The interest will be compounded quarterly and calculated on the daily outstanding balance of loan.

The NHAI will disburse 'COVID-19 loan' within 60 days of receiving a valid request from the concessionaire. The loans will be granted only to those parties who are not in default of contractual obligations as on February 19, 2020.

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Sandeep Upadhyay, MD (Infrastructure Advisory) Centrum Capital Ltd says processing time for granting loan should be faster as operators are facing immediate cash issues.

The build, operate and transfer (BoT) toll firms would get the loans in addition to extension in concession period by the number of days for which toll collection remained suspended.

The concession time shall be extended by a period, equal in length to the period during which the toll collection was suspended by NHAI, the apex highway development agency said in a circular.

In case daily collection is less than 90 per cent, the concession period would be extended in proportion to the loss of fee on a daily basis.

"It may be further noted that invocation of Force Majeure clause would be held only in a situation where the parties to the contract were not in default of the contractual obligations as on 19th February 2020. Further, the concessionaire should comply with the conditions/provisions of Model Concession agreement for claiming Force Majeure event," the NHAI General Manager SK Patel said in the circular.

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Following the announcement of nationwide lockdown to contain coronavirus, NHAI had suspended toll collection from March 26 to April 19.

Responding to the NHAI circular on compensation for toll revenue loss, Rajeshwar Burla, Vice President, Corporate Ratings, ICRA said that it is a positive development from liquidity point of view but it goes against the spirit of concession agreement.

"Such departure from concession agreement should have been avoided at a time when NHAI is trying to attract investors for TOT (toll-operate-transfer) and InvIT," he said.

Claiming that the decision to suspend toll was a force majeure political event similar to 24-day toll suspension during demonetisation period, Burla stressed that toll operators should get full compensation -  both interest cost and O&M expense for the suspension period -  from NHAI.

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