For the current fiscal, the National Highway Authority of India (NHAI) has set a target to build 4,500-km national highways.
The total debt of the National Highways Authority of India (NHAI) went up by nearly 9.5 times to Rs 2,28,252 crore in February this year, from Rs 24,188 crore as on March 31, 2015. There are concerns that debt repayment, pay-out money involved in arbitration, higher levels of construction and cost thereon might aggravate its already-precarious financials. Chairman Sukhbir Singh Sandhu shares with Surya Sarathi Ray how he wants to steer NHAI in coming days. Excerpts:
In the last fiscal year, NHAI achieved the highest-ever construction level of 3,979 km of highways; what is the target for the current fiscal?
For the current fiscal, we have set a target to build 4,500-km national highways.
How much of the Bharatmala programme (Phase-1) has been awarded so far and how much do you hope to award in the current fiscal year? What could be the likely ratio between EPC, HAM and BOT routes for project awards?
Up to March 2020, projects involving highway length of 10,676 km have been awarded under Bharatmala Paroyojana. HAM-EPC ratio would depend on response from the market. Until now, PPP (including HAM)-EPC ratio for Bharatmala phase-1 has been 42:58.
How many projects are under implementation now?
There are around 450 ongoing projects covering over 24,000 km of national highways which are under different phases of construction.
Apart from higher land acquisition costs, NHAI is bound to face tremendous fund crunch this fiscal due to a large amount of arbitration pay-out and Rs 24,108 crore for repayment of debt, including interest. At the same time, your borrowing limit has been reduced by Rs 10,000 crore to Rs 65,000 crore in the FY21 Budget. Also, against your demand for Rs 68,805-crore budgetary support for this fiscal, NHAI has been given only Rs 42,500 crore, including Rs 10,250 crore from asset monetisation. Aren’t you facing funding constraints?
Of course, land acquisition costs have increased in recent years. To lower the cash outflow against the land compensation, the NHAI is exploring land pooling and some other options to reduce land-related expenditure.
With the electronic tolls collection gearing up, toll revenue of NHAI has increased and it is expected that the traffic density will also increase after the lockdown is over. A gradual ramp-up of traffic is reasonably assumed.
Further, apart from raising funds from market through bonds and bank loan, etc, NHAI shall be exploring to raise funds from asset monetisation i.e. securitisation of toll revenue of certain stretches. The authority through the Ministry of Road Transport and Highways is also in talks with multilateral agencies like the World Bank to finance one of its expressways. As regards the arbitration payment, NHAI has also counter claims against contractors/concessionaires. So, NHAI is not under any financial strain.
Owing to Covid-19, toll collection is set to fall. Your asset monetisation programme might also face problems. Even the TOT-4 is not expected to sail through and investors might not show interest in the proposed InvITs. Further, banks may find it difficult to opt for toll securitisation.
NHAI has availed Rs 30,000-crore loan facility from SBI and PNB and this is unsecured. NHAI has also been able to raise funds from market at comparatively better interest rates. Further, four top rating agencies (CRISIL, CARE, ICRA and India Ratings) have assigned the highest rating – AAA – for its borrowing programme for the current financial year aggregating to Rs 65,000 Crore. NHAI has already entered into an MoU with NIIF for financing of road project. It is also in talks with New Development Bank for financing of Green corridor projects.
Private sector investment in the highway sector has been on the wane. What are your plans to bring the private sector back in highway development?
We have awarded more than 120 projects on PPP-HAM mode in the last three years. However, there are some concerns with regard to BOT-Toll projects for many reasons including funding issues. However, we have been working with the industry to address some of the challenges being faced by them, including financing challenges, We have fast-tracked dispute resolution and rationalised the Model Concession Agreement (MCA) framework to make investments in the highways sector more attractive.
Including the cost of land acquisition, what is the average cost of construction of highways now? How the cost can be reduced over the years?
The average cost of highway construction comes around Rs 20-25 crore per km, which varies due to various factors viz. 4/6 lane project, greenfield or brownfield project, number of structures, type of land to be acquired, etc.
The NHAI is working on alternative greenfield alignments. This will not only reduce the cost of land acquisition but the cost of utility shifting will also be reduced substantially. Land pooling and the value capture mechanism are also being explored.