For the second year in a row, the National Highways Authority of India (NHAI) is unlikely to borrow from the Employees’ Provident Fund Organisation (EPFO) in an effort to rein in the cost of funds. It had borrowed Rs 10,000 crore each from the EPFO in 2016-17 and 2017-18, but refrained from borrowing from the retirement fund body in 2018-19 again as its rates were higher.

Sources said EPFO’s portfolio managers are not willing to lend the NHAI at anything below 8%, which the latter finds a bit expensive as its average cost of funds hovers a trifle below 8%. The NHAI is authorised to raise up to Rs 75,000-crore debt in the current fiscal – it raised Rs 60,000 crore in 2018-19.

NHAI chairman NN Sinha had earlier told FE that out of the total borrowings, Rs 40,000 crore is expected to come from the National Small Savings Fund. Another Rs 25,000 crore may come from LIC. This apart, it might raise around Rs 5,000 crore through masala bond. It will also raise money through tax-free bonds from the domestic fund.

The total budgetary support for the NHAI in 2019-20, including estimated cess and plough back of toll and highway monetisation proceeds, is Rs 36,691 crore — around 1.7% less than Rs 37,321 crore accorded in 2018-19 (RE).

Besides, it hopes to raise around Rs 9,000 crore by giving around 1,000 km of highways on long-term lease under the toll-operate-transfer (ToT) model. The government had, in the Budget for 2018-19, permitted the NHAI to raise funds from the market through infrastructure investment funds (InvITs).

While for the NHAI, the cost of borrowing is the primary criterion for raising debt from any institution, the EPFO, on the other hand, always looks for getting higher rate of returns. Depending on its return on investments, the EPFO pays its subscribers interest on their deposits.

Under pressure to maximise returns from its investments, the retirement fund body pruned the interest rate on provident fund deposits for its subscribers to 8.55 % for 2017-18, the lowest in five years. In 2018-19, the Central Board of Trustees (CBT), the apex decision-making body of the EPFO, approved 8.65% rate of interest, which it is yet to be ratified by the finance ministry.

The NHAI has been tasked with executing almost the entire 24,800-km highway construction work under the first phase of the Bharatmala programme from 2018-2022. Last fiscal, the NHAI awarded 2,222 km highway projects, less than the 7,397 km awarded in 2017-18. It constructed 3,320 km in 2018-19, a little higher than 3,071 km in 2017-18.

For the current fiscal, it hopes to award 6,000 km of highway and construct a record 4,500 km.