Budget 2020: Highway ministry asks for 83% hike in budget outlay for FY21

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New Delhi | November 13, 2019 3:03 PM

Union Budget 2020: The Ministry of Road Transport and Highways (MoRTH) needs additional funds in the next fiscal to award and construct more highway projects via the engineering, procurement and construction (EPC) mode, in which the executing agency has to bear all expenses.

Union Budget 2020-21: NHAI has failed to award a single project through either the hybrid annuity model (HAM) or the build-operate-transfer (BOT) route till September of the current fiscal.

Budget 2020: Looking to build highways at a greater pace, the ministry of road transport and highways (MoRTH) has sought a 83% year-on-year hike in budgetary allocation for the 2020-21 fiscal, along with lowering of the debt-raising limit for National Highways Authority of India (NHAI) by Rs. 10,000 crore to Rs. 65,000 crore.

Sources said MoRTH has put forth its wishlist in a budget-related meeting held recently with its finance counterpart. Against the budget estimate (BE) of Rs. 71,000 crore, MoRTH has actually got (revised estimate) Rs. 78,625 crore in 2018-19 fiscal. For the current fiscal, the BE stands at Rs. 83,016 crore.

MoRTH needs additional funds in the next fiscal to award and construct more highway projects via the engineering, procurement and construction (EPC) mode, in which the executing agency has to bear all expenses. NHAI has failed to award a single project through either the hybrid annuity model (HAM) or the build-operate-transfer (BOT) route till September of the current fiscal.

HAM allows private investors to have very little skin in the game “sub-10% practically” this has been the sole channel for private investments in the sector in the FY17-FY19 period, after the stress in the sector led to virtual cessation of the BOT-Toll model, where the developer collects tolls to recoup investments and therefore bears real business risk. The share of BOT (toll) project awards has come down to naught in the last two years from its peak of 96% in 2012.

Increased risk aversion among a pool of investors that has anyway been limited, lenders’ chariness, issues related to last-mile land acquisition and cash flow problems of operational projects have all resulted in a drying up of the HAM projects. In FY19, the projects awarded through HAM slowed down to around 834 km of the overall 2,222-km projects awarded by NHAI.

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Meanwhile, as FE reported earlier, despite the apparent thrust being given to infrastructure spending, the finance ministry has rejected the road transport and highway ministry’s demand for hiking the budget outlay for it by Rs. 43,000 crore, or 51%, over the budget estimate.

In the Budget for 2019-20, MoRTH was allocated Rs. 83,016 crore for highway construction, up from Rs. 78,626 crore in 2018-19 and Rs. 61,015 crore in 2017-18. Of the total budgetary support for the current fiscal, MoRTH has already spent Rs. 51,798 crore, or 62%, by September end, as per the Controller General of Accounts data.

MoRTH had asked for a big hike in budget outlay as it apprehends that given the dearth of private investments, it requires more government funds to accelerate the pace of highway construction. The construction pace fell from 29.2 km a day in FY19 to 24.6 km a day in the first half of this fiscal.

The debt-raising threshold for NHAI has been lowered perhaps keeping in view that the authority is already sitting on a huge debt of Rs. 1.8 lakh crore as of March 2019 – up from Rs. 1.22 lakh crore in March 2018. Rating agencies have already warned that given its somewhat fragile states of finances and also because concessionaires are unwilling to take on building risks, NHAI’s construction could slow down sharply in the next couple of years.

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