Rs 1000cr Bonds For Tn Road Projects

The Tamil Nadu government is planning a Rs 1,000 crore bond issue to fund roads and highways in the state.

State highways ministry officials said the bonds would have a tenure of 30 years. They will also be tax-free under the special concessions given to the infrastructure sector. The issue is perhaps the largest fund-raising exercise in the state.

"Though banks and institutions are expected to be the major subscribers to the issue, a retail offering to the public is also likely,'' an official said. Institutions like the Life Insurance Company (LIC) have already expressed willingness to subscribe to the proposed issue, he added.

The government will also promote a state road development corporation as a corporate entity under the Companies Act. The corporation will act as a special purpose vehicle to implement highways and road development schemes.

The bond issue will be floated through the corporation.

"Work on getting the corporation registered under the Companies Act has already started,'' the official said. As a first step, land owned by the government as roads will be transferred to the corporation and classified as assets. The government is likely to be allotted equity in the corporation against the land. The corporation will then leverage its land assets as a collateral to raise debt. The Industrial Development Bank of India (IDBI) is likely to be involved in the fund-raising.

The fund-raising programme and the highway development plan are modelled on a similar exercise undertaken by the Maharashtra government recently. The Maharashtra State Road Development Corporation raised Rs 500 crore through a similar bond issue for development of roads, including the construction of 23 flyovers in Mumbai and converting the Mumbai-Pune express highway into four lanes.

The state government has been encouraged by the response to a Rs 100 crore bond issue floated recently by the Tamil Nadu Electricity Board (TNEB).