NHAI approves norms for value capture finance

The National Highways Authority of India (NHAI) on Thursday approved the land acquisition policy based on value capture finance.

Value capture finance or VCF is a type of public financing that recovers some or all of the value that public infrastructure generates for private landowners.

The norms approved by the NHAI seek to devise a mechanism to implement VCF, jointly by the states and NHAI, to part finance the cost of highway construction in order to make them viable.

Bharatmala Pariyojana provides for Grand Challenge Mechanism to take up projects on fast track where sufficient and timely land is made available by the state government. In addition, if the state government provides at least 25% of the land acquisition cost for bypass projects, then such projects will be taken up on priority.

The authority has allowed states to share the enhanced value of land in the project impact area or 1 km on either side of the greenfield/brownfield highway within the methods prescribed by the NHAI.

The states may explore the possibility of development of residential/commercial real estate in the project impact zone for which connectivity to the main highway/service road may be given by NHAI.

The Ministry of Road Transport and Highways has been grappling with higher land acquisition cost for the past few years. Approximately, a cost of ~12 crore per km is incurred in the expansion of a highway from two-lane to four-lane and the number would be five-six times higher in a greenfield project like an expressway.

The cost of the marquee Eastern Peripheral Expressway is Rs 11,000 crore, of which Rs 5,673.05 crore was the land cost.

The ministry was allocated Rs 91,823 crore for FY21, which was later revised to Rs 1.02 trillion as MORTH and its wings -- NHAI and National Highways and Infrastructure Development Corporation (NHIDCL) were on track with road construction.

The total budget allocation has gone up from Rs 83,015 crore last fiscal to Rs 91,823.2 crore for financial year 2020-2021. Of this hike of Rs 8,808 crore, as much as Rs 5,809 crore is through investment in NHAI met from monetisation of national highways. The balance allocation is for road works.