BS: FinMin to take review meet on NPA recovery next week

15 March 2019: With little possibility of the two big ticket IBC cases — Essar Steel and Bhushan Power and Steel — happening this fiscal, the Department of Financial Services (DFS) will meet the PSU banks on March 18 to review the status of their non-performing assets (NPAs).

The DFS has set an NPA recovery target of Rs 1.8 lakh crore for the public sector banks (PSBs) which has to be achieved by March end.

The meeting will be conducted via video-conferencing, said a banking source, adding that a senior DFS official will review the NPA recovery status of individual banks and the overall target.

Last year, Financial Services Secretary Rajiv Kumar had said that recoveries of about Rs 1.8 lakh crore were assessed by the banks which were from the cases under the Insolvency and Bankruptcy Code (IBC) and those outside it. 

So far the recovery has been Rs 1.1 lakh crore and the Essar Steel resolution may still happen, the Finance Ministry hopes.

The two key NCLT cases of Essar Steel and Bhushan Power and Steel have not seen a resolution yet. The National Company Law Appellate Tribunal (NCLAT) has now asked the Ruias, Essar Steel’s previous promoters, to first clear dues of nearly Rs 1.4 lakh crore to consider its bid for Essar Steel.

The Ahmedabad bench of the National Company Law Tribunal (NCLT) has already approved ArcelorMittal’s Rs 42,000 crore bid for Essar Steel last week, which has now been challenged by the Ruias. So a decision on Essar Steel resolution is likely to extend beyond this fiscal, the Finance Ministry feels.

The State Bank of India has over Rs 15,000 crore exposure to Essar Steel while the Bank of India and the Punjab National Bank will get Rs 1,800 crore and Rs 2,500 crore, respectively, from the Essar resolution.

“If the resolution does not happen by March-end, the banks will have to make additional provisioning of Rs 10,000 crore,” said a source.

The total claims admitted by the financial creditors in Essar Steel and Bhushan Power and Steel, the two big ticket cases in the Reserve Bank of India’s (RBI) list of 12 stressed accounts, are Rs 49,479 crore and Rs 47,145 crore, respectively.

The Finance Ministry was expecting the resolution of five to six accounts from the RBI’s list by March-end. The resolutions achieved so far are that of Bhushan Steel, Electrosteel Steels and Monnet Ispat and Energy.

The 12 large accounts where resolution under the IBC was initiated by the banks mandated by the RBI have claims of Rs 3.50 lakh crore.

According to ratings firm Icra, fresh NPAs in the banking sector are expected to moderate to 1.9 per cent to 2.4 per cent in FY 2019-20 due to an aggressive recovery drive and write-offs by the banks. The public sector banks are expected to turn profitable after four consecutive years of losses.

Sources in the Finance Ministry said that big ticket recoveries were due this month from Essar Steel and Bhushan Power and Steel, which together can fetch over Rs 60,000 crore. And they are just a few among the many. 

Icra expects gross NPAs of the banking sector to be Rs 8.3 lakh crore or 7.9 per cent for March 2020, as compared to the estimated 9.2 per cent for March 2019.

However, even with the new bankruptcy law in place, recoveries through the NCLT have not been very large, it said. 

But recoveries of around Rs 1.6-Rs 1.7 lakh crore from the accounts referred to the NCLT amount to 75-80 per cent of the recoveries from these accounts, which is higher than the provisions made by these banks.

In 2018, over Rs 80,000 crore was recovered from various corporate debtors under the IBC, according to the Ministry of Corporate Affairs.

The Business Standard reported

CG: TREND: Rush by banks to sell 715 bln rupees of NPAs before FY19 ends

15 March 2019: Nearly 715 bln rupees of bad loans have been put on the block by 16 state-owned banks and IDBI Bank, as they look to clean up their balance sheets before the current financial year ends on Mar 31.

The move is aimed at freeing up capital for lending in 2019-20 (Apr-Mar).

State Bank of India, Oriental Bank of Commerce, Dena Bank, Bank of Baroda, Andhra Bank, United Bank of India, among others, have offered to sell around 45,000 non-performing loan accounts to asset reconstruction companies, banks, non-banking finance companies and financial institutions.

In the Oct-Dec quarter, 11 state-owned lenders had put up 592 loan accounts with an outstanding of 440.13 bln rupees for sale, according to data complied by Cogencis.

Banks have been plagued by bad loans ever since Oct-Dec 2015, when Reserve Bank of India first conducted a system-wide Asset Quality Review. This led to 11 state-owned banks and one private sector bank being placed under prompt corrective action framework due to reporting losses, rise in bad loan ratios, and erosion of capital.

Even the time-bound resolution framework of the Insolvency & Bankruptcy Code has seen delays, which has led banks to look to offload even assets close to resolution, as they are still not certain on recovery timeline.

“Time value of money” was the reason cited by State Bank of India Chairman Rajnish Kumar when asked why the Essar Steel loan of 154 bln rupees was offered for sale, even as resolution looked to be around the corner. But, weak demand for the large value asset and subsequent favourable ruling for ArcelorMittal taking over the company, has led SBI to abandon the plan to sell this loan.

The attempt to sell Essar Steel loan made SBI the biggest seller in the bad loan sale space this quarter, with 1,187 accounts with an outstanding of 303.1 bln rupees offered for auction. This meant that SBI offered 42.4% of the 715 bln rupees that were placed for sale by all banks.

Bank of Baroda followed with loans to the tune of 95.56 bln rupees being on the block while Andhra Bank offered to sell loans accounts worth 76.34 bln rupees.

Reliance Communications, Alok Industries, Bhushan Power and Steel, Jayaswal Neco Industries and Jai Balaji Industries were the other cases with the National Company and Law Tribunal that banks looked to sell. These companies were part of the two lists of the central bank where banks were asked to file insolvency cases.

Bank of Maharashtra offered a whole portfolio of education and micro, small and medium enterprises loans for sale, which covered a large number of accounts at 42,790, although the total quantum was comparatively lower at 4.75 bln rupees.

Data compiled by Cogencis shows that banks were more aggressive in selling the bad loans in the Jan-Feb period than in March, as the lenders traditionally look to close out sales early in March itself. The March tenders run the risk of the deals spilling over into April, defeating the purpose of looking to clean up the March-end financials.

State-owned banks have to find internal sources for capital to begin fresh lending, as the government has not budgeted any capital infusion in 2019-20. Apart from sale of non-core assets or raising capital from the market, finding buyers for bad loans is an option that will help them begin the next financial year with a clean slate.

Following are the list of accounts and loans that has been offered for sale by banks in Jan-Mar:

Banks January February March
Amount in bln rupees Number of accounts Amount in bln rupees Number of accounts Amount in bln rupees Number of accounts
Allahabad Bank 5.81 41
Andhra bank 32.41 71 43.93 72
Bank of Baroda 33.12 15 59.28 49 3.16 14
Bank of India 2.06 1
Bank of Maharashtra 3.3 9 4.75 42790
Central Bank of India 3.54 2 33.69 5
Dena Bank 27.84 148 12.584 77 0.59 1
Indian Bank 7.63 55
Indian Overseas Bank 2.51 3
IDBI Bank 13.52 6
Oriental Bank of Commerce 6.36 14 8.163 19 2.86 2
Punjab National Bank 11.83 11 2 1
State Bank of India 190.5 203 60.08 771 52.48 213
Union Bank of India 20.21 24
United Bank of India 25.9 57 44.05 60
Punjab and Sindh Bank 1.15 1
Vijaya Bank 0.89 1
Total 261.36 382 249.707 1187 203.09 43165

Cogencis reported

BS: A2Z Infra hits the roof after one-time debt settlement

15 March 2019: A2Z Infra Engineering hit an upper circuit limit of 5% at Rs 18.05 at 11:48 IST on BSE after the company said it signed full cash one time debt settlement agreement with Edelweiss Asset Reconstruction Company.

The announcement was made during trading hours today, 15 March 2019.

Meanwhile, the S&P BSE Sensex was up 206.38 points, or 0.55% to 37,961.27.

On the BSE, 51,000 shares were traded in the counter so far compared with average daily volumes of 1.31 lakh shares in the past two weeks. The stock had hit a low of Rs 16.60 in early trade. The stock hit a 52-week high of Rs 32.10 on 16 March 2018. The stock hit a 52-week low of Rs 8.19 on 4 October 2018.

A2Z Infra Engineering had availed financial assistance as term loan from ICICI Bank and ICICI Bank has assigned all the rights, title and interests in the financial assistance granted by it to the company, in favour of Edelweiss Asset Reconstruction Company (the ‘Lender’), acting in its capacity as trustee of EARC Trust SC 217 vide Assignment Agreement executed in favour of EARC on 29 June 2016. 

The outstanding of Edelweiss as on 31 March 2018 was Rs 177.69 crore (including interest) and the same is settled for a total settlement consideration of Rs 41 crore. With this settlement, the debt of the company shall stand reduced by Rs 177.69 crore. 

Net profit of A2Z Infra Engineering rose 459.80% to Rs 5.71 crore on 70.03% rise in net sales to Rs 152.09 crore in Q3 December 2018 over Q3 December 2017.

A2Z Infra Engineering is a fully integrated electrical business group in India catering to the needs of domestic and international power sector clients in building distribution & transmission infrastructure.

The Business Standard reported

ET: Infotel opposes consolidation of Videocon cases at NCLT

16 March 2019: Infotel Business Solutions, the parent company of Infotel Broadband, which was sold to Reliance Industries Ltd in 2010, has objected to the consolidation of insolvency proceedings of Videocon group at the National Company Law Tribunal (NCLT). 

Infotel has argued that the proposed consolidation of insolvency proceedings of 14 Videocon group companies will adversely impact its rights as a creditor of one of the group companies where it accounts for 40% of total dues and to a similar percentage of voting rights as a member of the committee of creditors (CoC).

“When the debt of all 14 companies gets consolidated, our voting rights in the CoC will fall to 2% because our share in the consolidated debt will fall proportionately,” a spokesperson for Infotel Business Solutions told ET. 

Infotel Business Solutions is a creditor of KAIL Ltd, one of the Videocon group companies that stood guarantor for loans worth Rs 20,000 crore taken from a consortium of banks by Videocon Industries Ltd, the group’s flagship. KAIL is also a key company in the insolvency process as it houses the Videocon brand, according to sources in the know. 

Delhi-based businessman, Mahendra Nahata, is a major shareholder of Infotel Business Solutions. Nahata had bid for 4G spectrum in 2010 through his company Infotel Broadband, which he subsequently sold to Reliance Industries. The company has morphed into present day Reliance Jio. 

Videocon’s biggest creditor, State Bank of India, has moved an application at the NCLT to consolidate the insolvency proceedings of 14 Videocon group companies under one bench and has proposed that a common resolution professional be appointed to oversee the auction process for all the companies. 

The state-run bank has also proposed that a common resolution plan be submitted by prospective bidders for all the companies, to ensure that the creditors are able to maximise value from the sale of the business as the companies have interlinked operations. 

The NCLT is yet to rule on SBI’s plea. “India is still working on a regime for group restructuring,” said Ashwin Bishnoi, partner at law firm Khaitan & Co.

“Till the time it develops, creditors are entitled to argue that their rights could be compromised by such actions.” Videocon Industries was admitted for insolvency proceedings in June last year while several of its associate companies were admitted in the subsequent months. Five resolution professionals— KPMG’s Anuj Jain, PwC’s Mahendra Khandelwal, Divyesh Desai, Dushyant Dave and Avil Menezes— are currently tasked with overseeing the insolvency process for the various companies. 

SBI recently invited fresh proposals to appoint a single resolution professional for all the Videocon companies admitted for insolvency proceedings in anticipation of a favourable order from the NCLT.

An SBI spokesperson said in response to ET’s queries, “It is a policy of the bank not to comment upon individual accounts and its treatment”.

The Economic Times reported

LM: Etihad unlikely to get on board with Jet Airways bailout plan

15 March 2019: Etihad Airways PJSC is unlikely to agree to a provisional debt resolution plan proposed by lenders for the crisis-hit Jet Airways (India) Ltd, said two people directly aware of the development.

A meeting of the board of Etihad in Abu Dhabi on Tuesday remained inconclusive, with several members expressing reservations about the terms proposed by the lenders that included adding two nominee directors from the promoter group of Jet Airways, led by founder Naresh Goyal, the people cited above said on condition of anonymity.

“Another contentious issue was Goyal’s demand for exclusion of the perpetuity clause, which capped Goyal’s shareholding to 22%,” said one of the two people cited above.

The provisional pact envisaged a “new investor” injecting between  1,600 crore and  1,900 crore for about 20% in Jet Airways and the Goyal-led promoter group’s stake falling to 17.1%, with a caveat seeking to cap it at 22%.

An early resolution to the financial woes is crucial for Jet Airways. More than 50 of the airline’s 119 planes are currently grounded by lessors due to non-payment of lease rentals, while it has delayed salaries to pilots and interest payments on its debt.

According to the proposed agreement, the consortium of lenders, led by the State Bank of India (SBI), will convert its dues into shares and pump in an additional 1,000 crore to raise its stake to 29.5%. Etihad was also expected to infuse between  1,600 crore and  1,900 crore to raise its shareholding to 24.9%.

The exact details would be known once a deal is finalized.

“Etihad may still consider a rescue plan and the board is expected to meet again to discuss revised terms,” said the first person cited earlier.

Mint reported on 12 March that Goyal had written to Etihad seeking an emergency cash infusion of  750 crore. In a letter that was reviewed by Mint, Goyal cited Jet Airways’ financial stress that had led several of its lessors to ground planes due to non-payment of dues.

In a separate letter on 8 March to Tony Douglas, group chief executive officer of Etihad Aviation Group, Goyal sought dropping of the perpetuity requirement of capping promoter shareholding to 22%.

Jet Airways and SBI did not respond to emailed queries. A spokesperson for Etihad said the airline “does not comment on rumour or speculation”.

Meanwhile, Jet Airways said on Thursday it would be unable to repay $140 million of external commercial borrowings (ECB) of HSBC Bank UAE. The repayment obligation falls this month, with Jet Airways originally expected to make the repayment through two tranches on 11 March ($31 million) and 28 March ($109 million), respectively.

“Jet Airways is currently facing severe liquidity constraints and is working through a bank-led resolution plan for its revival,” Jet Airways said in an 11 March letter to HSBC Bank Plc (UK), which was reviewed by Mint. “Pending the implementation of measures listed in BLPRP (bank-led provisional resolution plan), we wish to inform you that the company is unable to pay Tranche A of $31 million falling due to repayment today,” it added. Etihad is the guarantor of the $140 million ECB facility raised by Jet Airways from HSBC Abu Dhabi.

Jet Airways, which is facing a severe cash crunch, had defaulted on a domestic loan repayment in December. According to Reserve Bank of India (RBI) regulations, lenders must find resolution to cases pertaining to defaulting companies—such as Jet Airways—within 180 days of their first default.

If the case remains unresolved, the company has to be referred to a bankruptcy court. Jet Airways had first defaulted on a scheduled interest payment to domestic lenders on 31 December.

The airline had a gross debt of  8,411 crore as of September-end.

Etihad holds a 24% stake in Jet Airways, while promoter Goyal and his family own a controlling 51% stake. Etihad has lost $1.28 billion in 2018, the third straight year the state-owned long-haul carrier has lost over a billion dollars. Since 2016, Etihad has lost a total of $4.75 billion, as its strategy of aggressively buying stakes in airlines from Europe to Australia didn’t reap the desired benefits.

In 2017, Etihad had to write off its investments in Air Berlin and Alitalia.

Meanwhile, oil prices, which drive West Asian economies including that of Abu Dhabi, have settled from their historic highs of over $100 a barrel to $65-70 a barrel. This has further restricted investment capabilities of West Asian carriers and its state-owned airlines.

On Thursday, Jet Airways shares fell 1.54%, or  3.70, to  236.90 apiece on the BSE while the benchmark Sensex ended little changed at 37,754.89 points.

The LiveMint reported

FE: PWC invites resolution plans for Essar Power MP on behalf of ICICI Bank

15 March 2019: PwC on Thursday invited resolution plans from prospective bidders for Essar Power MP on behalf of its lead lender, ICICI Bank. The power asset owes its consortium of lenders around Rs 5,300 crore.

“The consortium of lenders to Essar Power MP Limited plan to identify a resolution applicant for sale of company by effecting change in ownership and management control of the company owning a 1,200 MW (2×600 MW) coal-based thermal power project using sub-critical technology in the state of Madhya Pradesh,” the consulting firm said in a public notice.

The lending consortium to the project has appointed PwC as advisors for running the bid process and to invite resolution plans from investors or consortia of investors.

In September 2018, ICICI Bank had moved the National Company Law Tribunal (NCLT) seeking initiation of insolvency proceedings against Essar Power MP. However, after the apex court’s order maintaining a status quo on relief to power companies from the February 12 circular of the Reserve Bank of India (RBI), lenders have decided to resolve the issue outside the NCLT.

In February, Rajeev Sharma, chairman and managing director, Power Finance Corporation (PFC), had said that ArcelorMittal had offered to pay lenders Rs 4,800 crore for the 1,200-MW Mahan thermal power project in Madhya Pradesh, surpassing the Essar promoters’ one-time settlement offer of `3,500 crore.

PFC is part of the lenders’ consortium for Essar Power MP. Assets in the power sector had been a cause for concern for banks through much of 2018 as a lack of power purchase agreements and other structural issues had led to many of them defaulting on loan repayment obligations.

The Financial Express reported

FE: Ray of hope for Ruias in Essar Steel bankruptcy; NCLAT says will make room if they pay dues

15 March 2019: The National Company Law Appellate Tribunal (NCLAT) on Thursday directed promoters of Essar Steel to pay their dues, as per the orders of the Supreme Court, saying it would then “make room for” them.

The Ruias owe lenders an estimated Rs 80,000-85,000 crore at the group level, their counsel told the NCLAT bench. The Ruias had made an offer to pay Rs 54,389 crore but their offer came after the creditors had approved ArcelorMittal’s resolution proposal.

The Ruias had approached the Ahmedabad bench of the NCLT ( National Company Law Tribunal) but the tribunal in its March 8 order had approved ArcelorMittal’s Rs 42,000-crore bid for Essar Steel.

Subsequently, the Ruias moved the appellate tribunal.

“We may consider, if you pay the dues as per the Supreme Court order. Think over it. Think over Rs 80,000 crore money, we will make room for you,” the two-member bench headed by justice SJ Mukhopadhyay said.
Essar Steel’s counsel sought a week to respond.

The NCLAT also enquired why ArcelorMittal could not sweeten its offer, wondering, “If it (Essar Steel) is worth of about Rs 54,000 crore, why are you paying Rs 42,000 crore?” Abhishek Manu Singhvi, appearing for ArcelorMittal, said he would respond on the point at a later date.

Meanwhile, Standard Chartered Bank on Thursday objected to ArcelorMittal’s winning bid in the NCLAT and termed it as “discriminatory.” “The approval is not just discriminatory against us, it is against the law also,” senior counsel Kapil Sibal, appearing on behalf of the lender, said.

Standard Chartered is concerned as it has an exposure of Rs 3,487 crore to Essar Steel but is being able to recover a small fraction of this.

On October 4, 2018, the Supreme Court had asked the two contenders for Essar Steel, ArcelorMittal and Numetal, an entity in which Essar Steel promoter Ravi Ruia’s son Rewant had a stake, to clear the “taint of disqualification” by paying off debts of the companies they were associated with. ArcelorMittal has since cleared its liabilities of Rs 7,000 crore towards Uttam Galva and KSS Petron.

On October 25, 2018, a day after ArcelorMittal’s bid was approved by over 90% of the lenders, the promoters of Essar Steel offered to pay Rs 54,000 crore to clear their dues into both the financial and operational creditors. On January 29, 2019, the Ahmedabad bench of the NCLT, rejected the maintainability of their last-minute offer under section 12 (A) of the Insolvency and Bankruptcy Code (IBC).

IE: Bankers dither on taking Jet Airways to NCLT as govt pushes to keep airline afloat

15 March 2019: The government’s unsuccessful effort to disinvest its stake in Air India notwithstanding, potential funding by the National Investment and Infrastructure Fund (NIIF) and public sector banks such as the State Bank of India into cash-strapped Jet Airways is being viewed as an attempt to keep the private airline afloat ahead of the Lok Sabha polls.

According to sources familiar with the matter, bankers have so far refused to take Jet Airways to National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code, as the government is keen to ensure that the airline does not go down under.

The resolution for the airline would entail state-owned NIIF infusing funds in Jet Airways in return of equity stake and banks working out ways to ensure funding for the airline, which includes banks converting their debt into equity and likely funding support. “We have studied a number of options. Detailed resolution/restructuring plans have been discussed.

Ultimately, it is the lead lender – SBI – which will have to take a call, but it is clear going to NCLT is not the solution,” a senior PSU banker having loan exposure to the airline said.

Last month, shareholders of Jet Airways cleared approved conversion of loan into shares and other proposals.

On 14 February, Jet Airways’ board approved a Bank-Led Provisional Resolution Plan (BLPRP), whereby lenders would become largest shareholders in airline. Following approval from the shareholders, part of debt would be converted into 11.4 crore shares at a consideration of Re 1 apiece as per RBI norms.

A senior government official aware of Jet Airways’ plans said that while in a scenario where market forces are left free it was healthy if an airline or an airport went bust, there were 17,000 jobs associated with the airline. The official, however, denied government playing a role in Jet Airways’ resolution. “The government only comes into the picture if there is a question of FDI rules,” he said.

Another official in the Ministry of Civil Aviation said, on condition of anonymity, that it was upon the investors to decide whether Jet Airways is a potentially good investment. “NIIF is only partially government owned and the rest of it is privately funded. We must not forget that Jet Airways has significant assets in form of the prime slots it has on both domestic and international networks, and right now, it is available at a lower valuation,” the official said.

NIIF was set up in December 2015 to catalyse funding into the country’s core sector. It has a targeted corpus of Rs 40,000 crore to be raised over the years — 49 per cent of which will be funded by the government at any given point of time, while the remaining 51 per cent of the corpus is to be raised from domestic and global investors, including international pension funds, sovereign wealth funds, multilateral/bilateral investors.

NIIF, whose governing council is chaired by Finance Minister Arun Jaitley, is currently running a master fund, a fund of funds and a strategic fund. The Master Fund has formed a $3 billion ports and logistics platform, Hindustan Infralog Private Limited (HIPL) in partnership with DP World. While the mandate for the NIIF is to invest in profit-making long-term “infrastructure assets”, it is unclear how investment in an indebted and loss-making airline will fit in with investment philosophy of fund. NIIF did not respond to queries from The Indian Express seeking comments for the story.

Jet Airways’ lead banker SBI and PNB, also did not respond to queries. Jet Airways has a debt of over Rs 8,000 crore and needs to make repayments of up to Rs 1,700 crore by March end. The airline, has however, already defaulted on repayments on external commercial borrowings.

The Indian Express reported

FE: BoB-led consortium puts Rs 2,311 crore Garden Mills loan up for sale

15 March 2019: A consortium of lenders led by Bank of Baroda (BoB) has put on sale their exposure to Garden Silk Mills on a 100% cash basis, according to a bid document. As on February 21, the company owed Rs 2,311 crore to banks. All bank facilities of the textile manufacturer are in the default category.

“The highest bid may be further negotiated with the bidder. The lenders will have right for inter-se bidding/ Swiss challenge/ e-auction between the bidders,” the document said.

The Surat-based textile company is promoted by chairman and managing director Praful A Shah, joint managing director Alok P Shah, and executive directors Sanjay S Shah and Suhail P Shah.

According to Garden Silk’s annual report for 2017-18, the other lenders to the company are Allahabad Bank, Bank of India, Corporation Bank, Exim Bank, ICICI Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, State Bank of India, Union Bank of India, and Life Insurance Corporation (LIC) of India.

According to the bid document, Garden Silk Mills is a vertically integrated company operating in the man-made textile space that manufactures polyester chips, polyester filament yarn (PFY), preparatory yarn, woven (grey) cloth as well as dyed and printed sarees and dress materials. The manufacturing units of the company are located in Vareli (weaving) and Jolwa (manufacturing unit of chips and yarn) villages near Surat.

Bad-loan accounts put up for sale by banks so far in the March quarter have risen to over Rs 27,700 crore as lenders rush to make cash recoveries before the end of the financial year 2018-19. In their anxiety to close out deals, they have been willing to take fairly large haircuts, executives at asset reconstruction companies (ARCs) say.

Banks are demanding 100% cash payments through ARC sales to try and ensure their provisioning burden does not go up. “We are selling NCLT exposures in cases where we get cash,” an executive with a mid-sized public-sector bank (PSB) said. “We are making it clear to buyers that we want the cash in 60 days,” he added.

The Financial Express reported

TOI: Govt unveils new policy for resolving stalled highway projects

15 March 2019: The government has come out with a policy for resolution of “stuck” highway projects including the ones where proceedings have been initiated against the companies before the NCLT.

The move is aimed at unlocking huge money of both the lenders and private players including the crisis-hit IL&FS caught in about 28-30 projects as works have come to standstill due to fund crunch. 

Sources said the cumulative cost of the stuck projects could be around Rs 30,000 crore.

According to a road transport ministry circular issued on March 9, the road owning agencies including NHAI and NHIDCL can foreclose the contract by signing a supplementary agreement. It said the authority would make full and final payment to the private player for the “value of work done” or 90% of the debt due, whichever is lower. 

“The value of work done will be arrived at after a detailed assessment of the progress and the debt due will be as per the contract agreement, which mentions the exact cost of the project. So, there is no question of any company undue benefit, if it has got more loan by inflating the project cost,” said an official.

NHAI officials said almost all the stuck projects are the ones that are being implemented on “build, operate and transfer” (BOT-Toll) mode. The circular also defines the stuck projects that would qualify for such resolution – projects where work has stopped due to inability of the contractor or concessionaire on account of proceedings initiated against them before NCLT under the Insolvency and Bankruptcy Code or default on account of both the client i.e. NHAI, NHIDCL or PWD and the private player.

Officials said the new mechanism will be a win-win model for both the road owning agencies, lenders and private players. “Once the private player exits, we can invite bids for completing the project and start work. Similarly, the lenders would get back some portion of the loan rather than losing the entire amount. In the existing concession agreement there is no provision for any payment, if the contract is terminated before total or provisional completion of the entire project due to contractors’ default.

Hardly any agency does own the responsibility of its default for incomplete works,” said an official who did not wish to be named. The government had set up a high level panel to deal with the stuck projects after IL&FS went bust and bringing works of about 16-17 projects to complete halt. 

Sources said similar template can be followed in other sectors such as power and coal where sizeable number of projects are stuck.

The Time of India