BackRoads ministry explores ways to cut funding costs
Nitin Gadkari says ministry is looking for ways to tap insurance and pension funds to bring down interest costs
Premium
New Delhi: Allaying industry concerns over the high cost of capital, the minister for road transport and highways Nitin Gadkari said on Tuesday that his ministry was trying to tap insurance and pension funds for investment in infrastructure as part of its effort to achieve the target of building 30km of highways a day within a year.
“It hasn’t happened; we are trying. Through this, (we can) bring down the cost of interest and hence the cost of construction," he said at an event organized by the Confederation of Indian Industry (CII).
Earlier at the event, Prashant Ruia, chief executive officer of the Essar Group, said the industry was constrained by high interest rates. “The existing rates of infrastructure funding equity or debt has very few takers. Capital markets are not willing to finance projects because of their past experience. Indian debt markets, including banks, are not deep enough," he said.
“On top of that, the restrictions being brought in by the Reserve Bank of India has led to a situation where the appetite of institutions for financing green field projects is going down. At the same time, international banks and foreign institutions are not mandated to invest in the green-field infrastructure projects."
Gadkari also nudged the industry to take up the issue of high interest rates with finance minister Arun Jaitley. “At an interest cost of 12-13%, no infrastructure can be developed. We need to find a solution for this," he said.
Gadkari said that the government was also exploring a way of using loans in dollar currency directly without having to hedge it. “We are exploring a possible instrument of 15-year tenure to tap the ₹ 4,000 crore we receive in dollars so that the cost of hedging can be eliminated," he said.
He said the ministry had sanctioned projects worth ₹ 1 trillion in 9-10 months and that it was able to build 12km of highways a day in the fiscal year ended 31 March.
The roads minister said that of the 150 road projects which were stalled when he took over, only 26 remained unresolved, and by April end, even those would be resolved. For this the ministry has floated three cabinet notes. It proposes allowing developers of projects awarded before 2009 to exit two years after completing construction, waiver of penalties for termination of stressed projects and government fund infusion in half-complete projects.
Gadkari also rapped the National Highways Authority of India (NHAI) for compromising safety in a bid to make road projects economical by offering so-called “sweeteners".
“The project management consultancy (PMC) made a lot of mistakes in road designing. They removed the underpasses where it was not economically viable, called it a sweetener.... It may be financially good but it’s not good for the public," he said.
Gadkari, who also handles the shipping portfolio, said he expects the shipping and port sector to add 2% to gross domestic product (GDP) in a year.
He also said that a railway corporation has been formed within the shipping department to undertake 40 railway projects worth ₹ 24,000 crore in four months. The ministry will introduce the inland waterways bill in the forthcoming session of Parliament and was mulling a separate policy for companies planning to invest in technology that can be used for waterways, Gadkari said.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
