The National Highways Authority of India (NHAI) has settled an approximately Rs.650 crore arbitration claim with Infrastructure Leasing & Financial Services (IL&FS) of nearly Rs.200 crore through arbitration.

The NHAI decided to settle the claim through arbitration for less than 70 per cent of the Rs 800 crore required by the company, an official said. The NHAI in turn had charged Rs 150 crore from the company, resulting in a net outflow of Rs 650 crore.

This comes amid reports of the NHAI’s decision to settle deadlocked projects through arbitration rather than going the lengthy route of arbitration. This would reduce the agency’s debt burden which could reach Rs 2.5 trillion by the end of the financial year.

The comparison with IL&FS for the four lanes of Jorabat-Shillong (Barapani) section of NH-40 in Assam and Meghalaya via DBFOT (Design, Build, Operate and Transfer) pattern under BOT (Annuity) has been made to the concessionaire IL&FS Transportation network assigned .

The project began on January 12, 2011, with the projected completion date of January 10, 2014. For various reasons, work was delayed and a final commercial operational date was announced on January 30, 2019, the official said.

The Agency had commenced arbitration proceedings before the Arbitration Board regarding certain disputes relating to this project z , and certain additional works carried out on site valued at Rs 803.23 crore.

The NHAI also filed claims of Rs 145.33 crore, excluding interest, against the concessionaire due to delays and other issues.

“Now, through arbitration, the NHAI and the concessionaire have agreed to settle all claims for an amount of Rs. 197.62 crore,” the official added.

There would be an interest payment of Rs 54.53 crore equivalent for the settlement, making the final amount of Rs 252.13 crore paid to the concessionaire.

The arbitration process is being conducted by the NHAI to deleverage its balance sheet.

There are three reconciliation committees set up by the NHAI to look into these allegations. This includes retired judges.

The Department of Roads issued a set of guidelines in March to revitalize stalled national road projects. According to the guidelines, a consensual and executed agreement could be reached between the parties for projects awarded under Engineering, Procurement, Construction (EPC) mode and considered deadlocked to end the disputes.

The NHAI has assembled a portfolio of projects worth Rs 18,000 crore to be tendered over the next few months including five hybrid pension packages on the Vadodara-Mumbai Expressway, four EPC packages on the Delhi-Vadodara Expressway and projects in Uttar Pradesh and Bihar.

For the current financial year, the NHAI has approval to borrow Rs 75,000 crore in the current year, while the government support is Rs 36,691 crore. In 2018-19 (FY19), a mix of debt from banks, toll collection and a road monetization program should bring the NHAI Rs 62,000 crore. During this fiscal year, the NHAI has been allocated allocations for major work under the Bharatmala Pariyojana.

The money comes from the Central Road Infrastructure Fund, the Permanent Bridges Fee Fund and the Monetization of National Highways Fund.

The Bharatmala program envisages the construction of 20,000km of roads at an estimated investment of Rs 7 trillion.

While the overall allocation to NHAI has increased in recent years, the agency’s internal and extrabudgetary resources (IEBR) have increased.

In 2017-18, the IEBR of the NHAI was Rs.50,532.41 crore. It rose to Rs 62,000 crore in FY19 and further to Rs 75,000 crore in 2019-20.

The Highways Ministry hopes to receive nearly Rs.47,000 in budget support in the upcoming budget. This would be Rs 10,000 crore more than the 37,000 crore support the ministry received last year. Along with the fiscal support, the NHAI has a mandate to raise Rs 75,000 crore in the current fiscal year.