The National Highways Authority of India (NHAI) will have to seek the Planning Commission?s nod for its finance plan every year as the latter has refused to approve its long-term road map to borrow funds. The Plan panel has said it can?t give a blanket approval for the authority?s long-term borrowings as it would warrant government guarantee and result in fiscal stress.
The NHAI had last year sought the commission?s one-time approval to borrow R2.56 lakh crore in the next 20 years, saying that such blanket approval would come in handy for it to raise money for road projects as and when the need arises. The issue has been hanging fire since July 2010. For a comprehensive decision on the subject, the matter was also taken to the empowered group of ministers on roads, headed by finance minister Pranab Mukherjee, but no final call could be taken as the commission kept delaying its decision.
?In our opinion, the NHAI may need government guarantee in the long term as its repayment capacity will reduce successively if we approve the financing plan. And going by the government?s objective of fiscal consolidation, we cannot approve something that may lead to substantial future liability for the government,? a senior official in the Planning Commission said, explaining the rationale behind its stance.
The commission claims that its view is also supported by the finance ministry.
The ministry?s chief economic advisor Kaushik Basu recently said at the Indian Express Group?s Idea Exchange programme that ?the government used to give guarantee to borrowings by public institutions but now it is cautious of doing so as borrower?s inability to repay will lead to future contingent expenditure risk for the government.?
A senior NHAI official said the authority would now estimate its fund requirement on a yearly basis. ?Planning for the short term is better as we can foresee our needs more accurately based on project award and execution,? the official said.
The NHAI does not construct roads but it needs money to make the project viable for the concessionaire by paying them a fixed percentage of the total project cost.
As per new rules brought into effect last year, the NHAI has to make a one-time payment of 40% of total project cost as viability gap funding to the firm executing the project. Earlier, two equal payments were to be made, one for construction and another for maintenance. Incidentally, the borrowing plan was recommended by a committee under Planning Commission member BK Chaturvedi. The same committee had pegged the NHAI’s long-term (till 2030-31) borrowing requirement at R1.91 lakh crore. The NHAI later proposed an increase in the borrowing amount to R2.56 lakh crore, taking into account an estimated increase in input costs over the period.
Apart from borrowing, the NHAI’s finances include budgetary support, proceeds from road cess etc.
As per new rules brought into effect last year, the NHAI has to make a one-time payment of 40% of total project cost as viability gap funding to the firm executing the project. Earlier, two equal payments were to be made, one for construction and another for maintenance.
Incidentally, the borrowing plan was recommended by a committee under Planning Commission member BK Chaturvedi. The same committee had pegged the NHAI’s long-term (till 2030-31) borrowing requirement at Rs 1.91 lakh crore. The NHAI later proposed an increase in the borrowing amount to Rs 2.56 lakh crore, taking into account an estimated increase in input costs over the period.
Apart from borrowing, the NHAI’s finances include budgetary support, proceeds from road cess etc.
