PEs, wealth funds may get to buy stakes in highway projects: The Economic Times

This avenue of investment has been made possible by a change in exit rules. Developers of road projects signed before 2009 had to hold at least 26% stake, a norm that tied them to these projects even after completing them. The cabinet last week approved an exit policy for private investors in such projects, allowing 100% divestment of stake two years after completion of construction.

While the move would give a fillip to public-private partnership projects, the government wants to free up its own capital invested in projects awarded on engineering, procurement and construction mode 

"FDI in road sector has to come through PEs," the official said, adding that the government is preparing a model concession agreement to facilitate this. One option under consideration is a government-promoted special purpose vehicle that will pick up part of the equity in projects in which PEs and SWFs are interested. The Rs 20,000 crore National Investment and Infrastructure Fund, proposed by finance minister Arun Jaitley in his budget speech, could be tapped for this. 

"A special purpose vehicle could be floated by the NIIF for this. Government investment would boost the confidence of private investors as well," the official said. The government reckons about 80 projects constructed on a build-operate-transfer basis with locked-in equity of Rs 4,500 crore are likely to benefit from this policy. The government is keen to push the policy as it would free up resources, which can be directed towards new or languishing projects in the sector. 

Investors are interested in taking up operational projects, which have a steady revenue stream and are past the stage of execution risks. "Investible projects are limited. Projects have to service debt and have an assured cash flow. Funds have shown interest in investing but are seeking more clarity from the government before taking any action," said Manish Agarwal, Leader - Capital Projects and Infrastructure at PricewaterhouseCoopers India. 

In this financial year, the road ministry wants to award 10,000 km of road projects. In the past one year, the government achieved construction of an average 11 km of roads a day after awarding contracts for 7,972 km of roads during 2014-15.