Govt looking at ways to finance highway projects worth Rs 15 trn: V K Singh

Union Minister V K Singh on Wednesday said the government is working on ways to address various issues, including financing, for highway projects worth Rs 15 lakh crore.

The infrastrcutrue sector, particularly highways, can spur economic growth and the ministry is also looking at roping in the insurance sector for bank guarantees, the Minister of State for Road Transport and Highways said addressing a conference on "Sustainable Roads and Highways" by industry body Assocham.

"We have a basket of projects worth Rs 15 lakh crore. It is there. Now we have to find answers to many issues for these projects to take off...One of the issues which came up was how do you find finances. There are ongoing projects where work is not as per the time schedule laid down...The challenge is in terms of rules and regulations, investment and finance, what material we are going to use, the technology we are going to use...We need to find an answer," he said.

He said infrastructure and highways is the most profitable sector and the government is looking at monetising various aspects of the road sector.

"It is a sector which will propel the growth of the country...We need sustainable roads and highways," he said.

Singh said that amid talks of slowing global economy, highways sector has the potential to revive growth citing how the US survived economic depression.

"During 1930s (Great) Depression, the US survived because it built road infrastructure, which spurred steel industry, cement industry, automative, labour market," he said and added that "everybody is talking about economic slowdown which is a global phenomenon but in this slowdown if we want to spur the growth then the sector which must receive attention is infrastructure and especially the road infrastructure sector".

Singh said there is need to monetise road-side amenities to address financial challenge and added the good road connectivity is key for driving economic and social development of a country as roads are the engines of the economy enabling seamless movement of people and material across the length and breadth of the country.

About financing issues, he said the ministry is seriously looking at roping in insurance as bank guarantee for projects.

Assocham President B K Goenka said the high land prices has impacted viability and capital expenditure outlay in some projects and there is reluctance among public sector banks to finance projects.

"Project financing has become much tougher which has led to delays in financial closure of projects and, in some cases, stalling of projects under implementation. While we have seen several rate cuts from the RBI, these have not been passed on to the borrowers by the banks. This is leading to increased interest cost for the projects which in turn is affecting its viability," he said.

As the industry is facing the acute funding issues, the government can also look at developing bond market for long-term infra project financing, he said adding that this should also be supported by credit enhancement mechanisms to improve the credit ratings of the bonds which in turn will ease out the financial constraints in the sector.