National Highways Authority of India working on resolution of GMR, GVK standoff

There could be some good news in the offing for the GMR and GVK with regard to their road projects. Sources told NDTV Profit that the National Highways Authority of India (NHAI) is working on a compensation formula for the two concessionaires.

The formula is likely to include two aspects:  the NHAI may waive the premiums that GMR and GVK had agreed to pay to the NHAI, and the duo may also get their concession period extended by two years. Both projects are awaiting clearance by the Ministry of Environment.

A final decision on the compensation formula, being worked out by NHAI chairman R P Singh and newly appointed Road Ministry Secretary Vijay Chhibber is expected to be finalised by Wednesday. However, it is still uncertain if the two companies will be happy with the NHAI's offer.

GMR had agreed to pay an annual premium of Rs 636 crore for its Kishangarh-Udaipur-Ahmedabad highway project worth about Rs 6,000 crore, and GVK agreed to pay Rs 180 crore for its Devas-Sivpuri highway project worth Rs 3,500 crore covering a stretch of about 332 km.

According to the concession agreement, the premium payment is scheduled to start from the fourth year from the date of signing the agreement irrespective of whether or not the construction is complete.

Similarly, repayments to the lenders are scheduled to start from the third year of entering into the agreement for the highway project.

A concessionaire is given three years' time to complete the construction. Therefore, getting any extension will clearly help the concessionaires.

"The fact is that the NHAI needs the concessionaires more than the other way round," a developer said on the condition of anonymity. "The NHAI is under pressure from the PMO to resolve the matter and also send the right signal to the investor and developer community," he added.

The matter involving the two companies and the NHAI regarding the two highway projects is also pending in the Delhi High Court.