Bharatmala puts toll highways with Rs 19,435 cr debt at risk

Around 25 national highway projects under toll may face trouble in servicing a combined debt of Rs 19,435 crore due to direct competition from new economic corridors of the government's ambitious Bharatmala project.

The risk to existing road network arises on account of traffic diversion, which could impact the debt servicing ability of some of the build-operate-transfer (BOT/toll) and operate-maintain-transfer (OMT) projects, according to Icra Research, which assessed the impact of the proposed 44 economic corridors under Bharatmala.

Of the 44 corridors, about 21 would partially or fully affect the existing alignments while the remaining 23 involve up-gradation of the existing alignment, which will not result in any deviation from existing alignments. Overall, as per Icra analysis, there are 24 BOT and 1 OMT projects where traffic could get affected due to the proposed economic corridors.

However, an analyst, who does not wish to be named, said that there will also be traffic growth along with a periodic revision of toll rates. Though the traffic growth rate will not be as much due to leakages to the economic corridor, a certain percentage of growth cannot be ruled out.

Citing the example of Mumbai-Pune Expressway, an infrastructure developer, on condition of anonymity, said when this route was made fully operational in 2002, no one thought that it will face congestion in just over a decade. Now, for the last couple of years, the Maharashtra government has started working on augmenting the expressway to cater to the increased traffic. In a similar manner, other existing National Highways, too, will face congestion if corrective steps are not taken at an appropriate juncture.

Commenting on the report, Shubham Jain, vice-president & sector head, corporate ratings, Icra, said in the report, "The risk of traffic diversion is assessed based on the traffic mix, long-distance traffic movement and key feeder routes. The traffic diversion risk for about 72% of the projects is low, while 16% of the projects have a moderate risk and the remaining 12% of the projects have a high risk of leakage in traffic with the availability of an alternate route."

If the concessionaires are affected, the concession agreement, too, wouldn't help them much as the stretches of these economic corridors are either longer by more than 20% (one of the concession agreement clauses) or traverses a new route completely, and hence, does not fit into the description of the additional tollways as defined in the concession agreement.

"Therefore, traffic loss or diversion arising out of these would not get compensated under the concession agreement. In extreme cases, the concessionaire may choose to opt for termination of the concession agreement by invoking authority event of default clauses. As it cannot be termed as Authority Event of Default, in most cases this may end up in dispute with authority, or authority, in turn, invoking Concessionaire Event of Default," read Icra's report.

DIVERSION FEAR

• Of the 44 corridors, about 21 would partially or fully affect the existing alignments while the remaining 23 involve up-gradation of the existing alignment
   
• The traffic diversion risk for about 72% of the projects is low, while 16% of the projects have a moderate risk and the remaining 12% of the projects have s high risk of leakage in traffic with the availability of an alternate route
   
• However, there will also be traffic growth along with a periodic revision of toll rates. Though the traffic growth rate will not be as much, a certain percentage of growth cannot be ruled out