This fiscal, we (the SPV) need to borrow a little less than Rs 10,000 crore, but we already have got offers for Rs 29,000 crore from banks and financial institutions. It shows the success of the SPV model. We will see who offers the best rate and then decide accordingly.
The National Highways Authority of India (NHAI) invested Rs 90,000 crore or 84% of its FY21 target in April-January.
A special purpose vehicle (SPV), fully owned by the National Highways Authority of India (NHAI), plans to raise Rs 46,000 crore in debt over the next two-three years to part-finance the Rs 93,000-crore Delhi-Mumbai expressway project.
NHAI chairman SS Sandhu told FE: “The entire Rs 46,000-crore debt will be raised at the SPV level and the borrowing will be off NHAI’s balancesheet. This fiscal, we (the SPV) need to borrow a little less than Rs 10,000 crore, but we already have got offers for Rs 29,000 crore from banks and financial institutions. It shows the success of the SPV model. We will see who offers the best rate and then decide accordingly.”
The SPV – DME Development – is set up for the 1,261-km expressway that is being built on the engineering procurement and construction (EPC) model in which the authority bears all the expenses.
Earlier this year, NHAI conceived the idea of floating project-specific SPVs, especially for the large ones. The aim was to diversify its resource base and develop self-liquidating approach to raise finances for these critical projects.
As per the plan, the SPV will raise debt on its balance sheet, while NHAI will retain the operational control during construction and operation, and maintenance of the project. The toll on the projects housed in the SPV will be collected by the NHAI and the SPV will get the annuity payments without any construction and tolling risks. NHAI plans to form similar SPVs for other high-value highway projects.
NHAI – which has been a key vehicle for the government, along with various other state-run entities, to raise extra-budgetary resources to boost spending and spur growth – had a debt of Rs 2.28 lakh crore as of February 2020. Such EBRs typically mask the Centre’s fiscal deficit by shifting the borrowing on to the balance sheet of the entities concerned. For the current fiscal, NHAI is authorised to raise Rs 65,000 crore in debt. Analysts estimate NHAI’s borrowings may go up to Rs 3.31 lakh crore by FY23.
DME Development was formed by clubbing the upcoming greenfield project with the existing highway road on the Delhi-Mumbai corridor. The construction of this greenfield expressway, touted to be the longest one so far, is expected to be over in three years.
Toll collections from the existing the Delhi-Mumbai stretch as well as from the upcoming expressway, which is expected to be operational in three years, will be used to repay the debt. NHAI will chip in if there is any deficit in the repayment obligation vis-à-vis toll collections.
Nearly 90% of the required land for the project has already been acquired and 85% of the project length awarded. Construction work has already started on a 591-km project length. NHAI has borne all expenses until now, using its own resources. The new expressway will serve as an alternative to the existing route along the 1,440-km-long, and congested, NH-48.
The reduction in distance between the national and financial capitals of the country is expected to reduce by 8-9% the logistics costs on the corridor and is estimated to result in a saving of Rs 1 lakh crore to the economy over the lifetime of the stretch. The reduction in the distance is also estimated to save about 320 million litres of fuel per annum, NHAI said.