Roadblock: Why NHAI construction could slow down sharply in 2 years

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Published: August 30, 2019 12:10:15 PM

Analysts have expressed concerns on the authority’s ability to raise resources at a time when concessionaires want to fund as little of the construction cost as possible.

NHAI, NHAI NHAI construction, CAG, HAM route, BOT projects, Bharatmala project, Brijeshwar Singh, NHAI rulesAnalysts have expressed concerns on the authority’s ability to raise resources at a time when concessionaires want to fund as little of the construction cost as possible.

Given its somewhat fragile states of finances and also because concessionaires are unwilling to take on building risks, NHAI’s construction could slow down sharply in the next couple of years. It’s not the high debt alone — an estimated Rs 1.8 lakh crore at the end of March 2019, up from Rs 1.22 lakh crore in March, 2018 — that is worrying. The authority’s contingent liabilities in the next few years, according to former NHAI chairman Brijeshwar Singh, could be ‘more than double’ NHAI’s hard liabilities of Rs 1.5 lakh crore.

Moreover, NHAI has failed to set aside the mandatory sum half-yearly, from its income in a reserve fund, the Comptroller and Auditor General (CAG), has pointed out. This amount should be sufficient to liquidate the loan within a period which shall not in any case exceed thirty years. “However, NHAI has not created such reserve fund as contemplated in NHAI rules,” the CAG noted.

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Analysts have expressed concerns on the authority’s ability to raise resources at a time when concessionaires want to fund as little of the construction cost as possible.

Around 90-92% of the projects in the last few years have been undertaken either via the EPC route wherein NHAI has to fund 100% upfront or the HAM route wherein NHAI has to fund 40% upfront and remaining 60% over a period of 15 years. Consequently, the financial burden on NHAI has continued to remain high. “The share of the build-operate-transfer (BOT) projects has fallen sharply and to overcome this, NHAI may revert to this mode,” Icra said.

Meanwhile, post the revised land acquisition guidelines of 2013, the cost of land has risen rapidly; prices peaked at Rs 3.8 crore per hectare in 2017-18 but moderated to Rs 2.5 crore in 2018-19 due to more greenfield-related acquisitions. In 2018-19, NHAI was able to posses close to14,000 hectares of land.

However, the quantum of awards dropped to 2,222 km in 2018-19 from 7,400 km in the previous year while construction rose marginally to 3,320 km from 3,071 km in 2017-18. While NHAI has approvals to borrow Rs 70,000 crore from the markets in 2019-20, experts said it would become increasingly harder for the authority to tap the markets. Unless it receives bigger budgetary support, projects such as the ambitious Bharatmala may be delayed. Analysts estimate borrowings to go up to Rs 3.31 lakh crore by FY23, if NHAI is to fund the construction of around 25,000 km highway projects in six years under the Bharatmala programme starting 2017-18.

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