Betting big on the potential of green technologies and an unwavering political will to transform and multiply India’s mobility and energy infrastructure, Union minister for road transport and highways Nitin Gadkari on Tuesday said the country could become the world’s largest automobile market in the next 5 years, with a likely rapid proliferation of electric cars and vehicles run on “flex-fuel” engines.
India pipped Japan to become the third largest automobile market after China and the US in 2022 with sales of 4.25 million vehicles.
Even as highway and railway projects are increasingly financed out of Budget, the minister reiterated that finances aren’t a hurdle for accelerating the pace of India’s massive infrastructure upgrade.
Speaking after giving away the FE CFO Awards here, the minister said use of the right inputs, proven technologies and innovative financing models like the one pioneered for the Mumbai-Pune Expressway over two decades ago, will at once help reduce costs and improve quality and durability of infrastructure.
He also underlined how the infrastructure policy is increasingly being linked to the agriculture sector, in a manner that would benefit all stakeholders – farmers, developers and users.
The country’s “surplus food grains” production and resultant storage issues could be turned into an opportunity to raise the production and use of bio-fuels, he noted.
In fireside chat with The Indian Express Group Executive Director Anant Goenka and Financial Express Editor Shyamal Majumdar, the minister said India’s auto companies including Tata Motors, Bajaj, TVS and Hero are “ready with flex engines”, which can use 100 % bio-ethanol. “ Toyota is also set to launch a car which will run on ethanol and electricity in 6:4 ratio,” he said, adding that all these initiatives will help slash India’s crude oil imports, which result in annual forex outgo of a staggering `16 trillion at present.
Gadkari said the proposed `1 trillion project to unveil 100,000 electric buses, will cut travellers’ cost by a quarter and improve travel experience significantly. “Economic viability is very much there for this project… We will have to encourage people to resort to public transport, which will help address vehicular pollution, a major health hazard for the country.” He also expressed confidence about the commercial viability of hydrogen-powered vehicles.
The minister said a host of ongoing expressway projects like Delhi-Dehradun, Delhi-Amritsar and Bangalore -Chennai will help cut travel time considerably, posing a competition to the even airlines operating in these sectors. He added that about 95% of Delhi-Mumbai expressway will be completed by December.
While the National Highways Authority of India (NHAI) has outlined a plan to raise `10,000 crore through Infrastructure Investment Trusts (InvITs) in 2023-24, the minister said investors in these instruments fetch attractive return of 8.05%, and added that it is a viable model to encourage retail participation in infrastructure financing.
Asked whether the new tax on return on debt capital distributed by InvITs/REITS introduced in the FY24 Budget would hit mobilisation of funds through this route, the minister said, ‘the problem has been sorted out’, but did not elaborate.
“As minister, I have overseen `50 trillion worth infrastructure projects in the last eight years in areas like shipping, rural development and highways and am convinced that, a strong political will, development-oriented approach and faster decision-making process are paramount, while finances aren’t really a problem,” he said.
While the pace of the construction of national highways in the country touched a record high of 36.4 kilometre a day in 2020-21, it slowed to 30.1 in 2022-23. The ministry of road transport and highways has set a target to increase the pace to 45 km a day in the current fiscal.
Long years of reliance on the conventional engineering, procurement and construction (EPC) contracts and hybrid annuity model (HAM) have put a big burden on the NHAI and, by extension, on the government budget. NHAI’s debt now stands at over `3.5 trillion, 14 times the level in FY14. The government has barred the body from borrowing from the market since the last financial year, given that its annual debt servicing cost is already a staggering Rs 32,000 crore.
The NHAI is working on gradually increasing the share of the Built Operate Transfer (Toll) model in highways construction to 10% of the total awards, by making more changes in concession agreements and offering only viable projects with land already tied up for bidding.
The mix the NHAI is aiming at is to build 60% of highways through HAM, 30% through EPC, and 10% through BOT (Toll). However, an Icra report has said recently that in the current financial year too, EPC will remain the mainstay of awarding contracts accounting for 70-75% of total projects offered while BOT will be less than 5%.
