Maharashtra: MSRDC penal interest for debt recovery on the anvil

In a move that may result in a huge financial loss, Maharashtra State Road Development Corporation (MSRDC) has decided to bring down the interest rate on default payments of several toll collection contractors including that of advertising and telecom companies that owe the corporation more than Rs 500 crore, according to the estimations of MSRDC.

In other words, this means the MSRDC will provide waiver of some amount, if the defaulting companies agree to pay the total outstanding amount in one single instalment that will allow the corporation, that is already under debt of more than Rs 3,000 crore, to have capital in hand that can be used for upcoming infrastructure projects.

The MSRDC is executing projects worth Rs 70,000 crore, including 700-km-long Mumbai-Nagpur Expressway and 17-km-long Bandra-Versova Sea-Link.

As on August 2017, MSRDC's receivable from defaulting companies stood at Rs 573 crore. The amount is anticipated to have gone above Rs 700 crore, as of August 2018.

According to documents accessed by DNA, the MSRDC has approved a scheme known as one time settlement scheme (OTSS) wherein the penal interest rate, also known as interest on default payments, has been brought down from 24 per cent for toll contracts and 18 per cent for commercial contracts to uniform 9 per cent for both. OTSS can only be availed by contracts that closed on March 2017.

The MSRDC collects toll on five entry and exit points of the city along with Bandra-Worli Sea-Link (BWSL) and its commercial department. It also leases out space on flyovers in the city to advertising agencies, and telecom companies for setting up telecom infrastructure.

Several toll collecting companies and telecom companies owe MSRDC outstanding amount in crores including that of telecom companies, as per the defaulters list prepared by MSRDC in August 2018.

To name one, the list includes MEP Infrastructure and its subsidiaries that collects toll on five entry points and BWSL. However, MEP in a statement said, "Couple of its subsidiaries have gone into arbitration, and that there is no outstanding amount payable to MSRDC from MEP."

Further, MEP in the statement added, "Few of its subsidiaries have availed OTSS declared by MSRDC for the projects that are completed and already handed over to MSRDC."

Meanwhile, MSRDC officials have justified the move saying that OTSS is being introduced not to benefit private contractors but to reduce the outstanding amount and ease of cash flow. Such a scheme has been undertaken by several state government bodies to collect outstanding taxes, they stated.

OUTSTANDING BALANCE

It has proved to be a hindrance for its upcoming infra projects

Rs 3K cr MSRDC’s total debt

Rs 573 cr amount to be received from defaulting companies in Aug ‘17

Rs 700 cr anticipated amount to be received from defaulting companies in Aug ‘18

ONE TIME SETTLEMENT SCHEME

• The MSRDC will provide waiver of some amount, if the defaulting companies agree to pay the total outstanding amount in one single instalment
   
• This will allow the corporation, that is under debt of more than Rs 3,000 crore, to have capital in hand that can be used for upcoming infra projects
   
• It has approved a scheme known as OTSS wherein the penal interest rate has been brought down from 24% for toll contracts and 18% for commercial contracts to uniform 9% for both 
   
• The one time settlement scheme can only be availed by contracts that closed on March 2017