Key Points
Highway construction contractors have suggested that the provision that lenders must make against financing their projects be fixed at 2% instead of the Reserve Bank of India's proposal of 5%, which they said would hurt project viability...
"By increasing the provisioning from 0.4% to 5%, project viability will be the biggest impediment as interest cost will increase which is turn will increase the cost of the project both for the investor as well as the government," the National Highways Builders Federation (NHBF) said in its submission to the National Highways Authority of India, the finance ministry and the Reserve Bank of India...
"The phasing may not help the infrastructure industry as the lenders may factor in the highest provisioning rate in calculation of lending rates," it said.. Commenting on the extent of land availability for financial closure of infrastructure projects, the NHBF said land availability of not less than 90% should be considered sufficient..
"Land availability is the single largest risk factor which creates the delays or sometimes even leads to termination of projects," it said.. Calling for an increase in the moratorium period to a year, the NHBF argued that moratorium period is often availed of from lenders to sustain initial requirements of cash flow for stabilising operations...
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