The National Highways Authority of India (NHAI) has drawn up an ambitious plan to monetise 46 operational highway stretches of total length of 2,612 kilometres in the current financial year to beef up resources for its road building programme. The pipeline of projects that have been identified for monetisation in 2023-24 could be valued at around Rs 60,000 crore.
This will be the highest ever mop-up by the country’s principal road developer via this route, and nearly three-and-half times the funds raised in the last fiscal. The aggressive target signals the agency’s intent to pare its high debt, and reduce the increasing reliance on Budget funds to the extent possible.
Earlier, NHAI had identified 30 highway stretches of 1,987 km length for monetisation for 2023-24 with a mop-up-target of Rs 45,000 crore, but the list has now been expanded, by adding 16 more stretches.
NHAI had identified 14 stretches of 1,750 km length for monetisation in 2022-23 but could complete the process for only six highway stretches of 558 km and raise Rs 13,511 crore.
The mode of monetisation of the identified highway trenches this year, too, would be toll operate transfer (TOT) and National Highways Infra Trust, an InvIT established by NHAI. Apart from ToT and InvIT, the NHAI also raises funds through project-based financing as was done in the case of Delhi-Mumbai Expressway.
Asset monetisation in the highways sector is getting a big push because the NHAI’s dependence on the government has increased manifold since 2022-23 after it was barred from the debt market.
By the end of March 2022, the debt on NHAI’s books had touched `3.48 trillion and at least till the end of this financial year no addition to the debt burden of the highway builder is expected. Estimates show that the cost of servicing this debt is expected to stay around 18% to 20% of the allocation from the Union Budget till at least 2027-28.
An aggressive asset monetisation programme could ease the burden on the public exchequer as NHAI takes on more highways for development. NHAI has been forced to take on a bigger burden of highway development because the private companies have retreated from the sector.
Now 70-75% of the highways are getting built through engineering, procurement and construction (EPC) where NHAI has to pay the entire cost. Another mode is hybrid annuity model where NHAI pays 40% the cost of construction upfront to private concessionaires and rest in instalments.
The build operate transfer (toll) model, where the cost of construction is paid by the concessionaire which it then recovers through toll, was the mainstay of highway building between 2007 and 2014 before it came to a grinding halt because of disputes.
The government wants to revive the BOT model, but it is still expected to remain less than 5% of the total highway construction this year, according to estimates.