Bangalore/New Delhi: The National Highway Authority of India (NHAI) could delay plans to raise Rs 10,000 crore via tax-free infrastructure bonds, according to two officials, one from the road transport ministry and the other from the Planning Commission.
The money is required to finance various road projects, especially the ambitious target of building 20,000km of roads via engineering, procurement and construction (EPC) contracts for an estimated Rs 70,000 crore during the 12th Five-Year Plan that begins in April. A part of the amount will go towards viability gap funding for build-operate-transfer contracts.
Projects bid out as EPC contracts are typically those deemed unattractive for the private sector because they lie in areas that are either insurgency-hit or low in traffic.
There have been differences between NHAI, the ministry and the Planning Commission over the bond issue, according to the two officials, who spoke on condition of anonymity.
In November, road transport minister C.P. Joshi said NHAI will raise the money by December, but officials now say that due to the uncertain market conditions, it is reconsidering the timing of the bond issue and whether money should be raised in a single tranche or in two tranches of Rs 5,000 crore each.
The ministry official said the view emerging within the ministry was that money should be raised in two tranches. He said the ministry could raise the first tranche this fiscal, and the second after April.
Moreover, there was no consensus on the portions of Rs 10,000 crore that should be kept open to retail and institutional investors, he said. “The minister wants that 80-90% of the amount should be open to retail investors, but no final view has been taken yet.”
NHAI has already received the finance ministry’s nod for raising the money. This possible delay in raising funds comes even as NHAI is struggling to meet targets in awarding contracts this year. Joshi said on 23 November that out of a target of 7,300km for this fiscal, construction contracts for only 4,600km had been awarded till November.
J.N. Singh, member, finance, at NHAI, however, said actual road construction was on target this year. He said around 1,900km of roads have been built, against a targeted 2,500km.
Parvesh Minocha, managing director, transport division, at Feedback Infrastructure Services Pvt. Ltd, said the delay in raising the money may not hurt NHAI immediately as it had surplus cash.
“While a decision on issuing bonds could be linked to market conditions, the fact remains that there has been indecision in the system,” he said. The fact that NHAI had been without a full-time chairman for nearly a year was hurting it, Minocha said.
Brijeshwar Singh, the previous NHAI chairman, retired in December 2010.
The Planning Commission and NHAI have been at odds over the issue of making key changes to how contracts are awarded via the EPC route.
Officials say that while India’s apex planning body wants a mandatory two-year maintenance period in such contracts, NHAI wants it to be for five years, The Times of India newspaper reported on 8 December.
On 21 November, Mint said the Planning Commission wants to award EPC contracts on a turnkey basis, under which the lowest bidder—or the bidder requiring the least funding from the government—will be awarded the contract and will be responsible for building the road and maintaining it for a specified period.