Under this arrangement, FIs and companies will be asked to put money in a highway project which guarantees a minimum of 12 per cent return. NHAI is in talks with the Infrastructure Development Finance Corporation (IDFC) and a few nationalised banks for taking up Rs 350-crore Hapur-Moradabad highway construction work on an equity basis. The Infrastructure Equity Fund announced by the government in this years Budget can come in handy here.
Financing a project in the form of equity instead of loan involves the risk of money going down the drain in the event of project not generating money. But financial institutions are guaranteed a secure return with interest if they lend for a project. Therefore, the equity financing route will be mainly used for those highway projects, which have high traffic density.
Speaking to FE, a senior NHAI official said that the Delhi-Moradabad stretch on national highway number 24 has heavy traffic route.
The Hapur-Moradabad section is estimated to have a traffic of 20,000 passenger car units. Going by a conservative revenue estimate of Rs 30 lakh being generated per kilometre per year through tolling, the 90-km stretch can give as much as Rs 27 crore per year. To make the project more attractive NHAI can even include revenue from the 45-km Ghaziabad-Hapur stretch into the package. This adds another Rs 12.5 crore to the kitty, added an official.
This fiat of financial engineering by NHAI will be the next in its portfolio. The last addition to its portfolio of financial models was the annuity mode, which attracted criticism from all quarters but at present has some eight projects worth Rs 2,200 crore going through it.
Under the annuity mode, the operator undertaking a project gets a fixed semi-annual fee from the government. The risk of traffic and its effect on toll collection rests with the government, so unlike a normal build-operate-transfer (BOT) project the operators returns are assured.
Though NHAI officials seem confident of roping in FIs, banks and even multilateral agency for taking part through equity once the detailed project report for the Hapur-Moradabad section is ready, revenue flow under the proposed mode is not secured and depends largely on traffic numbers.
The equity financing element is present in a limited form in the special purpose companies floated by NHAI. However, as an official puts it, till now these companies were taking up projects largely funded through debt and with an equity component of just 30 per cent. In fact, NHAI is toying with the idea of picking up on the Moradabad Toll Company, which has executed the Moradabad bypass project on NH-24 and is now collecting toll on it, to take up the Hapur-Moradabad project on equity basis.