The government will shortly issue a tender for 3,000 kilo metres of roads on build-operate-transfer (BOT) model, said Nitin Gadkari, union minister for roads, shipping and MSMEs.
Gadkari was speaking at the Mint India Investment Summit being held at Mumbai.
"This morning we decided to issue tenders for 3,000 kilo metres of PPP (public private partnership) roads on the BOT model. We are also planning to open 2,000 petrol pumps on national highways. The land will be from NHAI and petrol pumps from the oil companies," said Gadkari.
This represents the government's expectation that the private sector will invest in greenfield road projects at a time when they are particularly risk averse.
Build–operate–transfer (BOT) is a form of project financing wherein a private contractor receives concession from the public sector to finance, construct and operate an infrastructure facility. As part of the arrangement, he is allowed to recover his investment, operating and maintenance cost in the project by collecting tolls over the life of the concession agreement.
With government’s allocation to the road sector falling in the next fiscal, Gadkari said, "In my department, we are not looking for govt's budget. All my projects are economically viable."
"We have taken some decisions to increase the national highway from 96,000 km to approx 2 lakh kilometres," Gadkari said, adding that he is confident that in the next three years, Delhi-Mumbai will be just 12 hours.
Gadkari added that he is not in favour of giving government guarantees to privately funded road projects. "My income is Rs40,000 crore per year. So i can give support to all the infrastructure project. So, when investors come to me and tell me they need government guarantees, I tell them chai piyo aur namaste. I am ready to give you income for your investment, daily, weekly, monthly, quarterly and half-yearly but I am not ready to give you government guarantees," he added.
In a few months, the government may make it mandatory that all bridges and roads in the country will be pre-cast. Gadkari said that he is planning to make pre-cast roads wherein, he is planning to appoint three Indian Institutes of Technology (IITs) which will take care of (technology) for construction of –roads, bridges and tunnels.
SBICaps Securities had estimated that in FY20 toll collection has grown at a very modest pace of 6% per km (from Rs5.5 million/hectare in FY13 to Rs8 million/hectare now) for NHAI's operating roads. “Revenue collection barely covers the interest servicing cost of these projects, let alone project returns. Thus, there is rising concern on debt servicing. NHAI’s outstanding debt of Rs1.8 trillion could entail interest servicing of Rs120-140 billion, which compares with Rs100 billion of NHAI’s toll collections during the year.
"My target is to increase the toll revenue to up to 1 lakh crore per year in the coming 5 years," he said.
The minster is also looking at alternative avenues of fund raising to recycle National Highways Authority of India (NHAI)’s capital. At summit he added that NHAI is raising funds through successful toll-operate-transfer auctions of public roads.
In the past, Gadkari has also shown his intent to raise Rs15,000-20,000 crore in the NHAI’s maiden InvIT offer in the coming financial year.
Gadkari who also holds the MSME portfolio, said for MSMEs there is a need to reduce logistics cost, power cost and production cost. For which, there is need to access new technological innovation.
"China is facing a lot of problem so it’s a good opportunity for Indian industry to increase export and capture the international market. So we are trying our level best to increase export and reduce import," Gadkari said.
He added that his ministry last week took a view of all the MSME schemes and is looking at helping enterprises in the tribal and rural areas. “Whatever issues are there we will try and resolve it and achieve the $5 trillion economy dream."