FinMin concerned over NHAI’s inability to use bond funds
The finance ministry has expressed concerns over the inability of the National Highways Authority of India (NHAI) to fully utilise the money raised through tax-free bonds in the last fiscal.
With project awards stuck, the highways agency has been forced to park about Rs 8,500 crore of such funds in fixed deposits.
“The finance ministry has raised the issue. It is almost like arbitrage where the NHAI issued the bonds with a coupon rate of 8.2 to 8.3 per cent, but is earning higher interest in fixed deposit,” a person close to the development said. The NHAI is understood to be earning about 9 per cent interest on the money it has parked with banks.
Significantly, the finance ministry is also looking at discontinuing with such tax-free infrastructure bonds from 2013-14. The issue of revenue loss through such bonds has been raised during internal discussions of Budget 2013-14.
Adding to the problem, investor appetite for these instruments has also significantly declined due to low coupon rates offered in the bond issue by Rural Electrification Corporation and Power Finance Corporation.
NHAI officials, while confirming the issue of fund in banks, said that the money could not be used due to slowdown in project award.
“Some of the money, we raised last year, could not be used as many EPC projects could not be bid out due to various regulatory hurdles. We have had talks with the finance ministry on this issue,” said JN Singh, member (finance), NHAI.
The finance ministry had allowed NHAI to raise Rs 10,000
Be the first to comment.
