IIFCL knocks on NHAI door for road funding tie-up

Written by Timsy Jaipuria | Raj Kumar Ray | New Delhi | Updated: May 16 2013, 07:34am hrs
With banks already stretched on their exposure to mega projects, the India Infrastructure Finance Company (IIFCL) has approached the NHAI for a funding tie-up for all the upcoming road projects that would be awarded by the sectoral regulator.

Though a novel idea, the proposal, if accepted by the NHAI by signing an exclusive pact with the IIFCL , may crowd out other lenders like IDFC and IL&FS.

"We have requested for a MoU for all road projects," IIFCL chairman SK Goel told FE.

The move comes at a time when road projects are finding it tough to raise funds with bankers. Developers have also raised concerns as they are unable to achieve financial closure. Not just this, a lot of bids launched last year could not find suitable bidders.

Observers feel that if such an MoU is signed then it would be easy for the concessionaires to not just raise funds but also provide them with an option of paying less interest rate.

However, it is now for NHAI to decide whether to sign such an agreement or not.

IIFCL, which was floated by the government in 2006 to help extend loan period of project developers beyond 10 years through the "take-out" financing scheme, wants to offer loans at the initial phase as well at lucrative rates. It is also eager to provide foreign exchange loans to developers importing capital equipment. IIFCL has sanctioned loans worth R90,000 crore so far of which close to 40% is to road projects. Recently, the PPP appraisal committee under the finance ministry has approved 18 road projects worth over R6,000 crore which are to be awarded to private players this year. Road projects accounted for more than 50% of all the 800-odd public-private partnership (PPP) projects involving a total investment of about R4 lakh crore.

While the PPP wave have swept the infrastructure space in the past 5-6 years, making India one of the role models globally for such a mode of development, delays in forest clearance, land acquisition and lack of long term finances have clouded the infrastructure space.