The National Highways Authority of India (NHAI) has the capacity to borrow and does not need additional government support, Union minister for road transport and highways Nitin Gadkari said on Monday amid concerns that NHAI’s toll revenues will not be sufficient to make interest payments by the end of the fiscal year.
“We have enough money coming from foreign pension funds and private equity funds who want to buy roads (under the toll-operate-transfer model)," Gadkari said at a press conference in Mumbai. “I do not need additional budgetary support to build more roads," said the minister who was in the city to discuss the first 100 days of the Modi government.
The Union budget for 2019-20 proposed to raise capital outlay for roads, railways and Metro projects by 12-19% over the previous year. The budget promised railways and Metro projects with additional support, but said the NHAI must find internal and extra-budgetary resources for building roads.
The budgetary support to NHAI was increased from ₹68,563 crore to ₹72,058 crore for FY20. However, the government wants the highways authority to redouble efforts through other fund-raising routes, such as toll-operate-transfer and infrastructure investment trusts.
“The NHAI is not financially stressed," Gadkari said repeatedly. “These media reports on NHAI’s finances being stressed are untrue. You should go by my track record. I have always been able to raise money for projects, be it the Mumbai-Pune Expressway or the Bandra-Worli Sea Link. We have very healthy internal rates of return. There is no problem regarding money," he said.
NHAI’s construction costs have surged in the last five years, led by a 30% annualized growth in average land acquisition cost from ₹6.8 million/hectare in FY13 to ₹34 million/hectare now, SBICap Securities said in a 23 August report. The authority has to comply with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The report said the proportion of debt funding has risen sharply in recent NHAI projects while “at the same time, toll collection has grown at a very modest pace of 6% for a km (from ₹55 lakh a km in FY13 to ₹80 lakh in March 2019). Hence, revenue collection barely covers the interest servicing cost of these projects, let alone project returns. Thus, there is rising concern over debt servicing," the report said.
NHAI’s payment outgo on account of interest is expected to be about ₹25,000 crore annually for the next two decades or so, the report said. To a question on NHAI’s debt touching ₹2.5 trillion by the end of the year and interest payments poised to cross toll incomes ( ₹10,000 crore in FY19), Gadkari insisted revenues from NHAI’s roads were rising. “Even in times of a slowdown, our traffic density expectations are rising. The finance minister has asked me to keep awarding road projects. So, from now to April 2020, I will award new road projects of up to ₹5 trillion."