With the National Highways Authority of India (NHAI) unlikely to receive much more budgetary support for 2019-20 than it did in 2018-19, the financier will need to tap the markets for a bigger amount and also look to monetise assets to raise resources. NHAI has armed itself with approvals to borrow Rs 75,000 crore from the markets this year.
Indeed, NHAI’s finances need to be seriously reviewed to ensure that the authority is able to generate cash flows and not be overly dependent on support. Currently, about half of the budgetary support is being used to repay loans — both the principal and interest amounts. But two years down the line, with the repayments going up in 2021-22, the principal alone would be an estimated Rs 17,554 crore while the interest bill would be around Rs 26,240 crore.
And so, the authority would need a lot more support. The repayments in 2019-20 are less onerous, estimated at close to Rs 20,000 crore.
The authority is expected to borrow around Rs 1.5 lakh crore in two years — 2019-20 and 2020-21. Rating agency Icra estimates NHAI’s total outstanding debt will increase to Rs 3.30 lakh crore by March 2022 from Rs 1.79 lakh crore in March 2019. Icra believes that while NHAI does have sizeable asset monetisation potential, close to its outstanding debt, monetisation cannot be expected to provide sizeable cash flows.
NHAI raised Rs 9,681 crore in the first TOT (toll-operate-transfer) tranche, but a similar attempt thereafter fell through. The third bundle is in the process of being monetised through which the authority aims to generate at least Rs 4,995 crore. A fourth bundle is also in the offing. It is targeting Rs 34,000 crore under TOT concessions by 2021-22.
The total budgetary support for NHAI in 2019-20 (Interim Budget), including estimated cess and plough back of toll and highway monetisation proceeds, is Rs 36,691 crore — around 1.7% less than Rs 37,320.63 crore accorded in 2018-19 (RE). NHAI’s borrowing limit was enhanced to Rs 75,000 crore from Rs 60,000 crore in 2018-19. NHAI has been tasked with executing almost the entire 24,800-km highway construction work under the first phase of Bharatmala programme from 2018-2022. Last fiscal, 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 the 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.
The government had, in the Budget for 2018-19, permitted NHAI to raise funds from the market through Infrastructure Investment Funds (InvITs) and also to monetise public-funded highway assets through the ToT model. NHAI had not exercised the first option so far. NHAI’s debts are soverign-backed but generally not repaid by the government directly; the entire budgetary support is its own earnings routed back through the Consolidated Fund of India. NHAI had reported Rs 267 crore loss in 2016-17, up from Rs 221 crore in 2015-16.