NHAI plans for asset reconstruction company fall by the wayside

The plan to set up a Rs 1,000 cr company for unfinished road projects didn't find support from banks and financial institutions

The National Highways Authority of India (NHAI) is likely to drop a proposal to set up an asset reconstruction company (ARC) for unfinished road projects, as banks and financial institutions aren’t willing to support the initiative.

In August this year, the NHAI board had given an in-principle approval for an ARC, in which the authority would have 25 per cent stake, with banks accounting for the rest. But banks didn’t show interest, after which NHAI started discussions in this regard with a few non-banking financial companies. However, the proposal failed to find favour with NBFCs, too, said a senior NHAI official.

The ARC, the NHAI had planned, would take over bank loans extended to unfinished road projects, numbering 20-25, and sell the completed projects to investors. The NHAI’s initial investment in the ARC was estimated at about Rs 1,000 crore.

The roads sector has been facing a slowdown, with interest from private entities on the decline. Many projects are stuck due to issues pertaining to land acquisition, environmental clearances, etc. While private developers had bid aggressively for projects, the traffic on these didn’t match their estimates. Also, through the past few years, the award of contracts for national highways has slowed.

Under Nitin Gadkari, the roads transport and highways ministry has restructured many projects that were cancelled or didn’t record bids from private players. Also, the ministry has been trying to revive stuck projects through various means. There has been some interest from private sector, also foreign investors but a big surge from private players in the roads sector is yet to happen.