Life Insurance Corporation (LIC) has asked National Highways Authority of India (NHAI) for securitising the entire proceeds from the Re 1 fuel cess for giving a Rs 6,000 crore line of credit, to be used for part-financing of the ongoing National Highways Development Project (NHDP).
NHAI is, however, agreeable to opening an escrow account against the annual repayments accruing to LIC rather than securitising the entire cess proceeds. LIC has also offered an interest rate of 100 basis points over the G-sec rate for the long-tenure loan, while NHAI is pitching for a rate of 80 basis points.
Both the issues have delayed inking of an agreement between the two agencies for activation of the crucial line of credit, which was to have taken place at the beginning of this financial year, government officials said.
Despite disagreements, officials said talks are on between the two agencies and said a memorandum of understanding for activation of the line of credit should come about soon.
NHAI had earlier planned to draw around Rs 4,000 crore through the line of credit this fiscal to make good its internal and extra budgetary resources (IEBR) target of Rs 6,200 crore for the current fiscal. With the delay in the signing of an agreement, NHAI has not been able to draw funds from LIC this fiscal, officials said.
NHAI would be resorting to staggered drawal from the credit line, officials said. NHAI is already tapping the debt market for raising money by way of tax-free bonds issued under Sections 54 EC of the Income-Tax Act, taxable bonds under Section 88 and other debt instruments. The money would be utilised to part-finance the NHDP.
NHDP entails four-laning of over 13,252 kms of national highways. The authority expects the Re 1 cess being levied on both petrol and diesel to accrue Rs 20,000 crore till 2007, the completion date of the NHDP.
Another Rs 20,000 crore is expected from multilateral funding agencies while Rs 13,800 crore would be raised from domestic market borrowings while the remaining is to come through private sector participation.
