The Parliament’s Standing Committee on Transport on Tuesday raised several questions on the functioning of the National Highway Authority of India (NHAI), hinting that some of its policies were the reasons leading to bad debts piling in the road sector. The criticism comes when banks and concessionaires are being blamed by the government for non performing assets, or NPAs.
The committee in its report Infrastructure Lending in Road Sector presented to Parliament said that there are several issues with the NHAI like underestimating project costs, bad planning and showing haste in awarding projects to developers.
It said that various stake holders complained that the NHAI underestimates the project costs and the concessionaires who bid out a project on L1 basis approaches banks and financial institutions with an inflated project cost for taking loans. L1 refers to lowest bidder. The committee said that it finds strange that there is a big gap between the cost calculated by NHAI and the banks for the same project.
While blaming NHAI, the committee also directed the authority to keep a watch over the excess loan amount over the estimated cost obtained by the concessionaire from the bank. “Why the concessionaire has been given a free hand to get the banks’ loan as per their wish?” said the committee headed by Member of Parliament of Trinamool Congress Kanwar Deep Singh.
NHAI in its statement on the report said, “We, at NHAI maintain high level of due diligence and follow all the processes which go through various government committees for clearances.”
Observing the NPA percentages of various banks in the road sector, the committee observed that for IDBI Bank the NPA percentage is as high as 52% of the total loan disbursed for the road sector and a large portion of this huge amount are NPAs, that too lent to a single concessionaire, Jaypee Infratech Ltd.
However, responding to committee’s observation, a senior banker at IDBI requesting anonymity said, “We have about Rs.7,900 crore worth of exposure to the road sector, about 95? of this is fund based. In this, three cases with aggregate loans worth Rs.380 crore are NPAs as of now. The total exposure of the bank in Jaypee Infratech would be around Rs.3,800 crore, which turned into NPA owing to the RBI’s asset quality review (AQR).”
He added that it would be unfair to club Jaypee Infratech case in the road sector since the repayment of the loans is dependent on development of 6,700 acres worth land surrounding the road project. “Hence, we have classified the account as a real estate project,” he said.
The report pointed out that State Bank of India has lent Rs.19,502 crore, out of which Rs.1,986 crore has turned into NPA and the Parliament committee was worried about the higher percentage of loan becoming NPA. The committee said that the banks should do due diligence while disbursing loans to concessionaires.
During the consultation process of the report, the committee was informed that NPAs totalled Rs.2.6 trillion from defaulting infrastructure projects and that by the end of 2015-16, it is estimated to go up to more than Rs.4 trillion.
However, the committee appreciated the steps being undertaken by the NHAI in last few months and recommended that model concession agreement of the NHAI may be circulated to all the banks and financial institutions. Bobby Portis Womens JerseyShare This