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  1. Budget 2018: TOT, Infrastructure investment Trust path for infrastructure funding

Budget 2018: TOT, Infrastructure investment Trust path for infrastructure funding

Budget 2018: INDIA’S INFRASTRUCTURE BUDGET for 2018-19, placed at close to Rs 6 lakh crore, will be funded both from budgetary and non-budgetary sources with the National Highways Authority of India (NHAI), expected to tap the markets via an infrastructure investment Trust (InvIT).

By: | Published: February 2, 2018 6:18 AM
Budget 2018: INDIA’S INFRASTRUCTURE BUDGET for 2018-19, placed at close to Rs 6 lakh crore, will be funded both from budgetary and non-budgetary sources with the National Highways Authority of India (NHAI), expected to tap the markets via an infrastructure investment Trust (InvIT). Budget 2018: INDIA’S INFRASTRUCTURE BUDGET for 2018-19, placed at close to Rs 6 lakh crore, will be funded both from budgetary and non-budgetary sources with the National Highways Authority of India (NHAI), expected to tap the markets via an infrastructure investment Trust (InvIT).

Budget 2018: INDIA’S INFRASTRUCTURE BUDGET for 2018-19, placed at close to Rs 6 lakh crore, will be funded both from budgetary and non-budgetary sources with the National Highways Authority of India (NHAI), expected to tap the markets via an infrastructure investment Trust (InvIT). So far, two companies have announced InvITs — IRB Infra and Sterlite Power.  Moreover, the government will use financial structures such as the TOT — toll, operate, transfer (TOT) model — to monetise existing road projects. NHAI has floated tenders for a bundle of nine road projects from which it is expecting to mop up Rs 7,000 crore; the bidding closes on February 9. The TOT is expected to attract bids from long term patient investors from overseas and local road developers who will partner them. Jayant Mhaiskar, VC and MD, MEP, said that InvITs were likely to attract more investors given the stricter regulatory compliance.

Meanwhile, extending the tenure of bonds under Section 54EC to five years from the current three years will help NHAI and rural Electrification Corporation to hold on to resources for a longer period. Owing to the failure of a number of PPP (public private partnership) schemes for roads, the NHAI has been forced to fund the major portion of projects converting them into quasi–EPC projects. Since the introduction of the HAM (hybrid annuity model) in 2015, a total of 48 projects have been awarded of which 42, worth Rs 43,500 crore, have seen financial closure. The Kelkar Committee report has recommended measures to revive PPPs.

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However, few projects are being implemented in the PPP mode; in Maharashtra for instance, out of a dozen projects for a total investments of close to Rs 1 lakh crore, only one project worth Rs 16,000 crore is in the PPP mode.Road developers have been tapping the bond markets for resources; so far they have raised Rs 23,000 crore in 2017-18 till November compared with Rs 33,000 crore in 2016-17. Manish Agarwal, partner, PwC India, said more avenues for funding need to be explored. “There will be whole range of products for investors, from bond holders to traffic risk takers, and InvIT is part of that range,”he said.

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