This time, the NHAI has extended the concession period for such developers without declaring it a force majeure political event. (File image)

Most of the 162 build-operate-transfer (toll) concessionaires, including private equity players, have decided to take the arbitration route to recover around Rs 650 crore as interest and operation and maintenance (O&M) costs from the National Highways Authority of India (NHAI) for the 25-day toll collection suspension period.

Sources said the concessionaires are upset with the NHAI for not declaring the toll collection suspension period from March 26 due to the Covid-29 pandemic as a force majeure political event, and thus rescuing itself from compensating the loss to concessionaires on the O&M and interest costs.

“For investors with relatively shorter investment horizon, typically private equity players, it is very important to get the compensation payout immediately. Else, their returns would be adversely affected. While for investors who want to stay invested till end of concession period including some of the Indian developers, it depends on whether returns are protected in net present value terms or not,” said ICRA’s vice-president Rajeshwar Burla.

Private equity players such as Macquarie, Brookfield and Cube Highways own around 21% of the 153 BOT (toll) projects and nine toll-operate-transfer (TOT) projects.

During demonitisation, The NHAI had declared the 24-day suspension of toll collection as a force majeure political event and cash compensation was provided to BOT concessionaires for interest on the residual project loan and O&M costs. This time, the NHAI has extended the concession period for such developers without declaring it a force majeure political event.

Also for the period when concessionaires were able to collect fees only partially, the concession period would be proportionately extended. Loss of 25% in collection fee as compared to the average daily fee for four days shall entitle concessionaire to an extension of one day in the concession period. This would continue till the time they reach 90% of their average daily toll collection.

“Projects with revenue loss of up to 18% and balance concession period up to 5 years, and projects with revenue loss up to 10% with balance concession period of up to 10 years are likely to get benefitted from the extension in concession period by three months. For all the remaining projects, the extension in concession period by NHAI does not compensate for loss in net present value terms,” Burla said.

Most of the developers have no qualms on the extension given; but they are wary about the NHAI proposal of providing loans to concessionaires to deal with the current cash crunch situation, instead of compensating for the loss of O&M and interest costs. The lockdown was announced by the government and it should bear the expenses on O&M and interest, not developers, said one concessionaire.

Experts said at a time when the NHAI is trying to attract investors for ToT and its soon-to-be-launched InvIT, such departure from the concession agreement could have been avoided.

India Rating & Research agency is of the view that the 25-day toll suspension period should have been treated as a political force majeure event.