Infrastructure construction firms only with ‘BBB’ or higher credit rating will be eligible to bid for National Highway (NH) projects built in public-private partnership (PPP) mode. If any bidder doesn’t meet the credit rating benchmark, it will have to submit a “letter of comfort” from its bankers or financial institution, while bidding for the project.
This is for the first time the highway ministry has set such a parameter for private construction entities. The move comes amid reports of contractors bagging projects under Build Operate and Transfer (BOT-Toll) and Hybrid Annuity Model (HAM) facing difficulty in arranging funds to start work, which delays the project implementation.
The ‘BBB’ rating, classified as investment grade, indicates that expectations of default risk are currently low and the capacity for payment of financial commitments is considered adequate.
Several projects have also been delayed because many highway builders are facing a fund crunch. In a recent reply to a Parliament question, the highways ministry had said at least 10 projects were delayed because of contractors facing problems and six of these were due to financial problems.
“This change will ensure we get bidders with sound financial health for BOT-Toll and HAM projects as the private players need to pump in their money. In case of government-funded or EPC contracts, builders don’t face such an issue,” said an NHAI official.