Good track for NHAI

Listing the highways authority is a good idea

Union Minister for Roads Nitin Gadkari said last week that the National Highways Authority of India (NHAI) might come up with an initial public offering or IPO, indicating that a proposal to this effect had been lodged with the Union finance ministry. Mr Gadkari has long argued that there is “no shortage” of money for road-building projects in India, and he did so again while discussing the possible NHAI IPO. Yet the facts do not suggest that the government should be so sanguine about funding. Indeed, even Mr Gadkari felt it necessary to argue that banks were taking too long to approve the financial closure of highway projects, sometimes taking as much as an entire year. Thus, listing the NHAI would open up an additional source of revenue, which the authority could then use to finance projects under the engineering-procurement-construction (or EPC) financing structure, in which the government takes the primary risk and responsibility for providing funds. The build-operate-transfer model, under which a private sector partner takes a share of that risk and responsibility, has simply failed to take off since the government has been unable to assure the private sector of policy stability and security.

Questions of fund-raising aside, listing the NHAI may have several benefits. For one, listing a company inevitably leads to pressures towards increasing transparency in its operation. It has become increasingly clear of late that the NHAI could benefit from such transparency. For example, Parliament was informed last month by Mr Gadkari that investigation was going on into allegations that over a million dollars was paid as bribe to NHAI officials by an American firm, in return for consideration for various contracts for highway supervision and construction. The bribes, according to the US authorities, constituted two to four per cent of the total value of the contract and were paid through subcontractors. This serves as a salutary reminder that the roads sector does not have a salubrious reputation overall. Not all of this is under the control of the Union roads ministry since multiple regulatory authorities can be involved in highways construction. But at least the organs and agencies of the central government should take the lead in transparency and probity. Perhaps listing the NHAI would take an important step in that direction.

The building of highways and roads has been a major emphasis of the Narendra Modi-led central government, which took office in May 2014. This is not surprising, as Mr Modi’s reputation as an efficient manager and builder of infrastructure depended in large part on testimony about the quality of Gujarat’s roads. Mr Gadkari has proven to be an energetic steward of his ministry, but it is unfortunate that the reality of road-building under this government has not always matched up to the hype. The minister at various points said that road-building would be stepped up to 40 kilometres a day, but actual achievement has been disappointing. It is to be hoped that opening up new sources of revenue and increasing transparency will go some way towards dispelling the constraints for a sector that has proven to be, so far, an underperformer relative to what was promised.