NHAI plans Rs 3,500-cr bond issue in January to fund projects

The govt plans to fund projects covering 1,500 km during the current financial year. About Rs 12,000 cr would come from budgetary grants

The National Highways Authority of India (NHAI) plans a bond issue worth Rs 3,500 crore in January to part-fund road projects. Another Rs 12,000 crore would come as budgetary grant from the government.

A total of 1,500 km was expected to be awarded under the government-funded mode during the current financial year.

The roads ministry had initially set target of awarding 5,000 km of projects on the government-funded mode this year, owing to a lack of participation from the private sector. But the target was revised as it seemed unachievable.

“We will be able to award 1,500 km of road projects before the financial year comes to an end,” a senior NHAI official said. “The proceeds from the bond issue will be used to fund construction of road projects and the ministry will bring the remaining. There is no dearth of funds and we have already awarded 500 km earlier this year.”

The ministry had scrapped a plan to award projects under the public-private partnership mode due to lack of interest from the private sector, after it stayed away due to funding constraints and land acquisition troubles.

The ministry is now running against time to award projects, as it has only awarded projects worth 500 km this year, against a planned target of 9,000 km.

Earlier, Vijay Chhibber, secretary at the roads ministry, had told Business Standard that the ministry was looking to award 5,000 km of road projects before the financial year ended.

The road sector has been struggling for two years, with a number of road projects being indefinitely delayed after private sector developers threatened to walk out of projects unless the government rescheduled their premium payment.

Premium is an amount developers agree to pay the government and is often calculated on the future flow of traffic and toll collection.

The government is now awaiting recommendations from the Prime Minister’s economic advisor, C Rangarajan, to decide the terms and conditions of the premium rescheduling, which is expected to free-up funds that could be used by the private sector to invest in new projects.

In addition, the government had  tweaked an exit policy meant to allow companies to exit road projects that are not lucrative.

A road regulator to address various concerns, including contract dispute resolution, was also in the works, and the ministry was looking to install a road regulator before the Budget session.

M Murali, Director General at the National Highway Builders Federation, said: “If private sector participation in the sector has to improve, the government should be willing to reduce the finance cost during the construction period. That is the phase when private developers face the maximum risk; and if we can do that, private investments will revive in the sector.”