ICRA
The Ministry of Road Transportation and Highways (MORTH), which suspended tolling on all national highways for 25-days (March 26 April 19, 2020), is set to extend the concession period to compensate for the loss in net present value terms for majority of the BOT Toll projects. As per ICRA, this event was expected to be treated under political force majeure clause of the concession agreement (CA), as was done during demonetization when tolling was suspended for 24 days in November 2016. The agency said that all force majeure costs (including interest and O&M) are to be reimbursed by the authority in case of a political event and revenue loss is to be compensated by extension in the concession period. As per the rating agency, the total O&M expenses and interest costs for the BOT Toll concessionaires for the 25-day period of toll suspension is estimated at ₹649 crore. The recent relief package announced by NHAI for BOT Toll concessionaires has two parts: (1) the revenue loss during and after toll suspension period will be compensated in the form of extension by three to six months in the concession period and (2) Covid-19 loan is provided for concessionaires to the extent relief is not granted under moratorium under RBI guidelines. Many BOT concessionaires have already opted for loan moratorium on their project debt; thus, in such cases, the quantum of Covid-19 loan eligibility is not significant. For the entities that have not opted for loan moratorium earlier, the Covid-19 loan is a positive from liquidity point of view.

Said Vice President, Corporate Ratings, ICRA, Rajeshwar Burla, “NHAI seems to have taken a different approach when compared to the toll suspension during the demonetization period, when it compensated the concessionaires for the interest and O&M costs. Possible reason for this deviation could be the availability of moratorium on debt servicing under RBI guidelines. Further, O&M costs for all operational toll projects are also not expected to be significant. Nevertheless, this approach may end up becoming contentious with concessionaires disputing the proposed relief measures. Also, these measures discriminate between concessionaires as entities that have not opted for loan moratorium earlier are better off – they would now have access to Covid-19 loan from NHAI at a much cheaper rate of bank rate plus 200 bps with flexible repayment terms.”

The extension in the concession period is for a period equal in length to (a) the period during toll suspension which is 25 days and (b) for the period in proportion to loss of fee on a daily basis (where daily collection is less than 90% of average daily collection for previous accounting year and increasing the result thereof by 5%). For instance, loss of 25% fee as compared to daily average for four days shall result in an entitlement of one day increase in concession period. The floor and ceiling for extension in concession period has been set at three and six months, respectively. Post resumption of tolling, the toll collections reached 30-35% of pre-Covid levels in the last week of April 2020, which subsequently improved to 50-55% in May 2020. “In net present value terms, the relief measure does not adequately compensate for the losses incurred by majority of the operational BOT Toll road projects. Such departure from the concession agreement could have been avoided as it may have ramifications on attracting investments in TOT and NHAI’s InvIT,.”
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