The Comptroller and Auditor General of India (CAG) has sought the cost audit of national highway projects as it feels expenses are rather high. It has said the government should curtail its debt-raising measures.
According to an official in the know, the CAG has raised concerns over the burgeoning costs of the National Highways Authority of India’s (NHAI’s) projects. It has alerted the Ministry of Finance, saying the NHAI’s borrowings are also the government borrowings and should be accounted for accordingly.
Experts are of the opinion that the NHAI’s debt situation is a cause of concern. It is expected to touch Rs 2.5 trillion by the end of the current fiscal year (2019-20 or FY20). The payment outgo on account of interest is expected to be about Rs 25,000 crore annually in the next two decades.
Major sources of income for the NHAI is toll revenue and grants from the government. Since last year, it has been monetising completed projects. About Rs 8,000-9,000 crore will come from tolls. This is used for maintenance of highways.
The NHAI’s borrowing target was raised 21 per cent in FY20; it can raise Rs 75,000 crore. The government will provide support to the tune of Rs 36,691 crore.
In FY19, the NHAI raised Rs 62,000 crore through a mix of debt from banks, toll revenue, and a road-monetisation scheme. If the NHAI monetises its assets it would lead to a steady decline in its toll collection as the agency which undertakes the operation and maintenance of the projects will be getting the levy.
Financial stress of the NHAI had become a concern, with the Prime Minister’s Office (PMO) recently stepping in with suggestions. The PMO asked the Ministry of Road Transport and Highways (the parent ministry of the NHAI) to improve its operational performance.
The PMO also suggested that the NHAI monetise its road assets base through toll-operate-transfer (TOT) auctions or through an infrastructure-investment trust (InViT). It asked the NHAI to bid out new projects under the build-operate-transfer (BOT) model where the government’s capital commitment is minimal.
“More TOT also mean that the government would lose out on toll revenue and to keep up with the aggressive highway construction plan government needs to spend more,” an official said requesting anonymity.
Recently, Road Transport and Highways Minister Nitin Gadkari said, “The NHAI is a AAA rated organisation and we can raise enough debt to keep building roads. What the PMO has said in its note are only suggestions. It’s not as big as the media is making it out to be. The NHAI has always been able to meet its fund-raising targets.”
A senior NHAI official said, “We are repaying debt every year and we have taken cognisance of the suggestions of the PMO and will give our response to them.”
Besides project monetization, the NHAI is also looking at reviving the BOT model of construction. Under the BOT, private players build, operate and maintain the road for a specified period of time before transferring the asset back to the government. In the case of HAM, the central government bears 40 per cent of the project cost and the remaining amount is arranged by the developer.
The government has made fund allocation to the NHAI for major works under the Bharatmala Pariyojana, entrusted to the organisation for execution this. The money will come from the Central Road Infrastructure Fund (CRIF), Permanent Bridges Fee Fund (PBFF), and Monetisation of National Highways Fund (MNHF).