New Delhi: The decision of the National Highways Authority of India (NHAI) to take an unsecured loan of 25,000 crore from State Bank of India (SBI) has drawn flak from within the authority and also from experts.

Critics believe the move will impact NHAI’s finances and credit ratings and have serious implications for future.

The move is a deviation from NHAI’s traditional borrowing methods of raising resources through long-term bonds issued to various investors, including the Life Insurance Corporation of India, the Employees’ Provident Fund Organisation and other qualified investors, tax-free bonds and Masala bonds.

The loan, the agreement for which NHAI will sign with State Bank of India on Friday, is for 10 years, with three years of moratorium on repayments.

The money will be disbursed within 31 March 2019 and the repayment would be made by NHAI in 14 equal half yearly instalments after the three-year moratorium is over.

The rate of interest would be based on one month MCLR (marginal cost of funds based lending rate— the minimum interest rate of bank below which it cannot lend) and the interest accrued on the amount outstanding will be paid on monthly basis.

“Infrastructure development cannot be undertaken by such unsecured loans. You have to involve people, individually and through foreign investments. The move will have long-term implications if the projects get delayed or the concessionaire exits project midway," said a senior NHAI official on condition of anonymity. Raising resources through bonds is the most secure way, he said.

“The move will impact credit ratings for NHAI and also the overwhelming response it has been getting through Masala bonds and asset recycling, as well as the Moody’s rating of Baa3 rating given in 2017," said another infrastructure financial expert who also did not want to be identified.

The road ministry, NHAI’s parent body, requires 1 lakh crore through internal and extra budgetary resources (IEBR) as investment for development of national highways in 2017-18.

The NHAI move comes in the wake of the government failing to provide the resources and asking the authority to borrow the funds from the market.

Jagannarayan Padmanabhan, director at CRISIL Infrastructure, supported the move.

The internal and extra budgetary support envisaged for the roads sector was to the tune of 62,000 crore, according to the budget announcement, he said. This bodes well for the authority as they would be able to deploy this for achieving the ambitious targets set by the ministry. It also gives a positive signal to the stakeholders in the sector about the continued commitment and follow through for implementation of the Bharatmala programme.

The fund infusion is in lines with the government’s policy of going for EPC (engineering, procurement and construction) route to fund infrastructure as the PPP (public-private partnership) mechanism is being reworked. This funding is a necessary step towards that policy, said Jaijit Bhattacharya, president, Centre for Digital Economy Policy Research.

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