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Govt fast-tracks payment cycle for stressed road developers

To help infrastructure developers reeling under covid-led challenges, the ministry of road transport and highways (MoRTH) and the National Highways Authority of India (NHAI) have adopted faster payment mechanisms and shortened the cash cycle for road developers contracted with them, to ensure project execution does not suffer during the lockdown.

According to MoRTH data, between April and May, it disbursed ₹18,700 crore to developers, up 46 times from the ₹400 crore released in the year-ago period. NHAI disbursed ₹10,295 crore between 22 and 31 March, and another ₹15,000 crore in April-June.

Both MoRTH and NHAI migrated from a milestone-based payments system to a monthly payments mode. In the earlier system, billing and payments under the engineering, procurement, construction (EPC ) model were linked to the completion of pre-determined physical milestones.

For hybrid annuity model (HAM) projects, NHAI released funds for working capital needs even before the milestones were completed. The funds were offered at 200 basis points above bank lending rates, and offered low-cost working capital to developers. The payments are later set off against settlements that the government owes the contractor under the HAM projects.

Developers, especially those who faced a cash crunch when toll collections fell sharply during the early lockdown period, welcomed the move. The move helped construction across national highways to pick up pace. Data from MoRTH shows project execution in the June quarter rose to 1,823km, from 637km in April, but lower than the 2,155km in the year-ago period.


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