NHAI says higher flow of revenue has cut loan need

Rise in premium income reduces borrowing estimate to Rs 83,000 crore.

With a substantial increase in premium revenue from projects awarded, the National Highways Authority of India’s (NHAI) says its estimated long-term borrowing requirement has reduced considerably.

The B K Chaturvedi committee, appointed in 2009 to examine the National Highways Development Programme and related aspects (it gave its second report last year), had said NHAI would need to raise Rs 191,000 crore by 2030-31.

“The huge rise in premium income in the recent past has ensured we will have to borrow only Rs 83,000 crore, much less than the borrowing plan approved by the Chaturvedi committee. We plan to raise between Rs 10,000 crore and Rs 15,000 crore for the coming six years,” said J N Singh, member (finance), NHAI.

FISCAL VISIBILITY

* NHAI awarded 21 of 33 projects on a premium

* Premium income of around Rs 3,000 crore expected

* NHAI to reduce its borrowing by Rs 100,000 crore till 2030-31

* The BK Chaturvedi committee’s financial plan had put borrowings at Rs 191,000 crore

* NHAI’s borrowing plan at Rs 83,000 crore till 2030-31

* NHAI to raise up to Rs 15,000 crore every year till 2016-17

A company offering a premium means it is committing to an annual payment to the government over a period of time, instead of seeking a grant for building a road. Companies bid a premium if they are confident that the toll revenue accruing would more than offset their costs.

Singh said they were expecting premium income to increase further in the coming years, as a number of road widening projects (from four-lane to six-lane) is still to be awarded. In the current financial year, it has awarded 21 of 33 projects on a premium. The premium income from these 21 projects would come to around Rs 3,000 crore per year and will increase by five per cent every year till the concession period ends.

Of the rest, nine projects were given on a grant and the other two were awarded on annuity payment.

NHAI has said it would award 59 projects covering 7,994 km, with a total cost of around Rs 60,000 crore, in 2011-12.

Tax-free bonds
On Friday, NHAI also said it would raise Rs 5,000 crore through tax-free bonds, with an option of increasing it to Rs 10,000 crore. These bonds would attract an interest rate of 8.2 per cent per annum for 10 years and 8.3 per cent for 15 years, respectively.

Around 30 per cent of the total bond size are to be reserved for individuals investing up to Rs 500,000, another 30 per cent for the Rs 500,000 and above high net worth individuals’ category and the other 40 per cent for financial institutions.

NHAI officials say they do not need the money immediately but it is to be used for acquiring land to construct expressways and to make annuity payments.