| Easier exit route for road makers |
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New Delhi, 29 January The finance ministry has approved a proposal put forward by the National Highways Authority of India (NHAI) and the Union road transport and highways ministry to change the exit policy for road developers. The proposal is to allow developers of existing and coming projects to sell or transfer their stake in the special purpose vehicle formed for the project, without having to create anew SPV. “ The finance ministry has approved the proposal and it will come into effect immediately,” said a senior official at the ministry. According to the proposal, developers of public- private partnership ( PPP) projects awarded or to be awarded on the build- operate- transfer (BOT) mode will, when wanting to exit, have to make a representation to the lenders. Upon approval, they will be charged a penalty. This will be subject to a cap of one per cent of the total project cost, the amended policy says. Road projects are undertaken through SPVs comprising the concessionaire ( operator) and the highways authority. The projects are usually awarded for 20- 25 years. The construction is done in three years and the tolling period starts once the project is built. The previous policy did not allow transfer of equity but only substitution of a concessionaire, following which a new vehicle had to be formed. The policy had no takers, as the new vehicle did not get the perquisites offered to the original one, including a tax holiday. Road developers are sceptical. “The valuation of road projects will be in the lower side, so even if a concessionaire wants to exit a project, he might not get the right valuation. The new policy is also lender- oriented, since the concessionaire has to seek lenders’ permission,” said B Murali, director- general, National Highway Builders Federation. Finance ministry okays proposal to sell or transfer stake in projects without setting up a special purpose vehicle WIDER PATH |NHAI made a proposal to the roads ministry 18 months ago |Roads ministry notified exit policy substituting developer asked to create new special purpose vehicle |NHAI and developers concerned over tax holiday not being extended to the new SPV |New policy allows developers to exit projects, and buy into the existing SPV |Lenders and NHAI’s approval needed before move |Applies to all existing and new two- four- six lane highway projects |
| YOUR MONEY |
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Now, the Pension Fund Regulatory and Development Authority ( PFRDA) is proposing to allow earlier withdrawal. In a circular issued on January 15, PFRDA has proposed withdrawals, not exceeding 25 per cent of the contribution made by the subscriber, be permitted from an individual pension account. This may be subject to conditions such as the purpose, frequency and limits. The regulator has invited suggestions till February 15, after which final guidelines will be announced. The thinking is to provide an early exit, similar to EPF, said the head of a pension fund. “ It is largely aimed at government employees, who have been subscribers since 2004 and must have built up a significant corpus,’’ he said. The official added there was a lot of pressure to introduce flexibility in NPS and this will ensure subscribers will not withdraw the entire corpus. Currently, a subscriber can exit only when he or she attains the age of superannuation ( with government employees) or at 60 years ( for other subscribers). Even then, 40 per cent of the accumulated corpus must be used for purchasing an annuity. If any subscriber wants to exit before this, at least 80 per cent of the accumulated corpus must be used for purchasing an annuity and the balance will be paid as a lump sum. In addition, the circular proposes subscribers can withdraw up to 25 per cent of the subscription, not the corpus (returns earned on the subscription will not be touched) after completing 10 years in the scheme. This can be done for specific purposes such as purchase of a house, education or marriage of children, or medical treatment for specific illnesses for self, spouse or children. Such a withdrawal can be allowed three times during the tenure and there should be agap of at least five years between each withdrawal, except when required for medical treatment, the circular said. The conditions for withdrawal are similar to those for EPF. However, financial planner Paul D’Souza of Cuzinns Investment Services says allowing withdrawals from NPS will defeat the whole purpose, which is to give cash flow after retirement. “ As it is, a withdrawal facility is available with EPF; for salaried employees, that is enough.,’’ he says. PRIYA NAIR Up to 25% of contribution can be taken out, for specified purposes and with time limits NPS proposes to relax no- withdrawal rule |
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