Road construction may not always get subsidy

Road construction may not always involve subsidy. Private companies will pay the government around Rs 664 crore for building 17 highway projects instead of seeking viability funding.

NHAI has awarded 68 projects worth Rs 62,176 crore in the last one year. Out of these, 17 had been awarded on negative grant and around 20 with viability gap funding (VGF). In VGF, the government funds up to 40 per cent of the total project cost to make the project financially viable for developers.

“One-fourth of the projects awarded have yielded revenue profit (negative grant) amounting to Rs 664 crore to the government,” Union Road Transport Minister Kamal Nath told Business Standard.

Awarding a project on revenue profit or negative grant means that the developer, which receives the project, will share the profit with the National Highways Authority of India (NHAI).

A senior NHAI official explained that the money for the same were all estimated and could be even more.

“These charges start coming only after the projects become operational and the concessionaire shares a percentage of the profit it earns from the project. This also keeps on increasing by five per cent every year. Ultimately, we get more money than estimated,” said a senior NHAI official.

Industry sources say the reason behind such huge response was that more and more road projects came for bidding after quite some time. “Such huge number of road projects came up for bidding only after three years and many of the developers bid aggressively for it,” said M Murali, director general, National Highways Builders Federation.

“Infrastructure developers aggressively bid for it because lot of their investments in equipment and people they had hired were lying idle,” added Murali.

There have been reports suggesting that NHAI would get bankrupt as it is awarding lot of projects on VGF. An issue paper by Gajendra Haldea, advisor to the Planning Commission deputy chairman, said NHAI would have an outgo of about Rs 50,000 crore over the next three years, whereas the cess used to finance it — Rs 2 on the sale of each litre of diesel and petrol — might not exceed Rs 25,000 crore during the period.

So, it would have to take a debt of Rs 25,000 crore in addition to the Rs 5,000 crore already on its books, added the report.