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Business News/ Politics / Policy/  Future toll income to fund roads: Nitin Gadkari
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Future toll income to fund roads: Nitin Gadkari

Transport minister says his ministry is exploring option of raising funds by selling securities backed by future toll collections

Nitin Gadkari, minister of road transport, highways and shipping at the Hindustan Times Leadership Summit in New Delhi on Friday. Photo: Pradeep Gaur/MintPremium
Nitin Gadkari, minister of road transport, highways and shipping at the Hindustan Times Leadership Summit in New Delhi on Friday. Photo: Pradeep Gaur/Mint

New Delhi: The roads ministry is looking at the option of raising funds by selling securities backed by future toll collections from national highways to finance road construction.

The National Highways Authority of India is expected to earn 6,000 crore of toll income this year and 10,000 crore in the next, minister of road transport and highways Nitin Gadkari said on Friday at the Hindustan Times Leadership Summit.

“For 15 years, if I can securitize this amount, we can get 1,20,000 crore," Gadkari added, without explaining the math behind the figure.

The roads ministry is also exploring ways of raising cheaper capital from abroad for investment in the sector.

“Now the interest rates in Indian banks is 12-13%, which is not good. So I can raise capital from abroad and contractor from India, it will be a good combination, where the cost can be reduced and money raised with low interest cost, so internal rate of return will be good," Gadkari said.

He also said it was time for the Reserve Bank of India to cut interest rates. The central bank will hold its next monetary policy review on 2 December. Reducing the cost of capital is important to revive public-private partnerships (PPPs) in the infrastructure sector, the minister said.

Gadkari said he will be holding consultations with Prime Minister Narendra Modi and finance minister Arun Jaitley to give some concessions to encourage public and private investment in road projects, shipping and inland waterways.

The roads ministry has seen private investment dry up in the sector in the past two fiscal years and has been looking at various policy measures to revive PPPs. As many as 20 road projects worth nearly 27,000 crore failed to get bids from private developers in the last two fiscal years.

The ministry awarded just 3,169km of road projects in the year ended 31 March against a target of 9,500km. The previous year, it could only award 1,916km against a target of 12,000km. The PPP model, under which the government executes a project jointly with private companies, has been put on the back burner in favour of the engineering, procurement and construction (EPC) model until the economy improves and the PPP model becomes viable.

“Raising money may be possible by securitizing future revenue and/or by borrowing, if EPC is the way forward," said Parvesh Minocha, group managing director (transportation) at infrastructure consultancy Feedback Infra Pvt. Ltd.

“Given the current negative investment sentiment in the infrastructure space, the proposed EPC mode can be an interim kick-starter. However, even if restarting PPP mode—which has proven to be a much superior mode of procurement—is a target for after two years, the work on resolving the fundamental issues ailing PPP must begin in the right earnest," he said.

Gadkari also said that the shipping ministry is mulling a new legislation seeking the authority to convert rivers into waterways. “As far as waterways are concerned, Parliament has passed a law by which only five waterways are there. Now we are preparing a new Bill where my department will get the authority to change any river in the country into a waterway," he said. “We are going to the Parliament for that."

Speaking on the new road safety Bill, Gadkari said he will push for it in the winter session of Parliament. He said he was confident that within two years, roads, shipping and waterways will contribute 2% of gross domestic product.

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Published: 21 Nov 2014, 01:21 PM IST
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