The InvIT is part of govt plans to tap alternative funding sources to boost public spending in the roads sector
Gadkari says funds have been firmed up from local lenders for long-gestation projects
Mumbai: The National Highways Authority of India (NHAI) will initially raise ₹15,000-20,000 crore in its maiden InvIT offer and then go for a larger round, depending on the response it receives from investors, Union minister Nitin Gadkari said.
NHAI’s InvIT offer, expected in the months ahead, is part of the government’s plans to tap alternative sources of financing to boost public spending in the roads and infrastructure sector amid declining private sector interest in the build, operate and transfer model, where the entire initial cost is borne by them.
In addition to the InvIT offer, the government has firmed up funds from domestic lenders to raise money for long-gestation projects, Gadkari, Union minister for road transport and highways, said in an interview on Monday. “We are working closely with the Reserve Bank of India on this issue and I just spoke to governor Shaktikanta Das and he has assured that banks will fund projects up to 30 years subject to financial viability," he said. “This is for the total cost of projects, land acquisition, cost of construction, against toll receipts. State Bank of India has assured us ₹50,000 crore already."
An InvIT manages income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects. While two private sector road developers have raised money through InvITs, the government’s plan to step into this market has enthused investors wanting to bet on the infrastructure sector. The Union cabinet cleared NHAI’s plans to launch an InvIT in December.
In a press release last month, the government said: “Given the magnitude of the Bharatmala programme ( ₹5.35 trillion), NHAI would need adequate funds to complete the projects within the prescribed timelines. As part of this exercise, a workable option is to monetize the completed and operational national highway assets to unlock their value and offer attractive schemes to private players to invest in construction of new national highways."
“The InvIT will come soon, in the next (fiscal) year," Gadkari said. “The initial package is small, at ₹15,000-20,000 crore. Money is not a problem and we have new models (of financing) coming up."
Earlier this month, finance minister Nirmala Sitharaman unveiled a ₹1 trillion National Infrastructure Pipeline for the next five years. While the roads sector is a significant part of this programme, the budgetary allocation to the roads ministry has failed to keep pace with the government’s ambitions, forcing the former to look elsewhere for funds.
In the Union budget for FY20, the allocation to the ministry of road transport and highways increased 12% to ₹1.12 trillion, while support to NHAI increased from ₹68,563 crore to ₹72,058 crore. Meanwhile, NHAI’s debt is about ₹2.5 trillion and interest payments are poised to outstrip toll revenues this year.
“Infrastructure has always received budgetary support from the government and this increases every year," Gadkari said when asked about expectations from the FY21 budget that will be announced this Saturday. “With NHAI’s ability now to raise funds, the budgetary allocation of ₹80,000 crore is becoming negligible. We can take more risk now. Money is not an issue, we will keep awarding projects."
Over the last two years, NHAI has completed two successful rounds of the toll-operate-transfer programme to monetize a clutch of road assets by awarding 30-year concessions to private equity funds.
Gadkari added that with electronic toll collection being implemented at toll plazas on national highways, NHAI’s average daily toll revenue has touched ₹80 crore from about ₹60 crore before. NHAI has received cabinet approval to raise long-term financing from banks against future toll revenue, a fundraising programme called toll securitization.
Gadkari also said India’s vehicle scrappage policy is awaiting final clearance from the Prime Minister’s Office. The policy will phase out the country’s fleet of old polluting commercial vehicles plying on the roads and boost automobile demand.
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