“The National Highways Authority of India (NHAI), which constructed 1,987-km long highways last  fiscal, has set a target of building 3,000-km highways in the current fiscal. NHAI chairman Raghav Chandra speaks about the authority’s plans regarding awarding of projects, investments and borrowings for the current fiscal in an interview with Surya Sarathi Ray of FE. Excerpts:

What is the NHAI’s plan for construction and awarding of highways for the 2016-17 fiscal and how does it compare with the previous two years?

The target for 2016-17 is to award 6,000-km of highways and construct new stretches with a total length of 3,000 km. In 2014-15 and 2015-16, we had constructed 1,501 km and 1,987 km, respectively.

A total of 3,067-km highway projects were awarded in 2014-15 and 4,344 km in 2015-16.

What are the modes to implement these projects?

About half of these projects will be built through the engineering-procurement-construction (EPC) route and the newly designed hybrid annuity model will be used for the other half. However, we have not given up on BOT (toll) route and are trying to develop 10% of the projects through this route. This is even as demand from developers for the BOT (toll) project remains rather tepid.

What is your total budget for the current fiscal and how do you plan to fund the investment?

The total budget for the current fiscal is Rs 70,000 crore. Of this, we would be raising Rs 50,000-55,000 crore through market borrowings. There would be borrowing from LIC, EPFO. Besides, taxable and tax-free bonds will be issued to raise funds. The balance funds would come from the budgetary support from the ministry as well as from the road cess and toll revenues. Compared to last year’s Rs 6,500 crore toll collection, we expect to collect Rs 7,500 crore toll this year.

What is your cost of borrowings now?

Last year, for tax-free bonds, it was 7.25% and for taxable bonds, about 8%. With the downward pressure on the interest rates, it would be relatively easier for us this year. We are also open to
raising funds from overseas, but it will all depend on whether foreign investors would be interested to invest in the NHAI projects.

You are yet to complete one year in office. What are the problems you have faced?

Major issues before us are getting the support of the state government for land acquisition, utility shifting and ensuring that compensation is awarded in a timely manner to those whose land has been taken. The NHAI has been extremely sensitive to those whose land has been taken. Yet, we find state governments have been slow in disbursing the compensations. As a result, the whole processes get delayed. They are slow in shifting utilities. Forest and environment clearances take time as well. We have increased the pace and coordination with the state governments. Now, we cite department-wise problems so that it becomes easier for a state chief secretary to resolve issues.

How much land have you acquired in 2015-16?

We have acquired 9,000 hectares of land in 2015-16 against 6,750 hectares in the previous year. For the current fiscal, we are targeting to acquire 10,000 hectares. Is it that the cost of land acquisition has gone up?

Yes, today the cost of land acquisition stands at an average of Rs 2.13 crore per hectare compared to Rs 1.35 crore per hectare in the last fiscal. Land acquisition now accounts for 40-45% of the total
project cost.

There were plans for monetising some highway projects. Where do they stand now?

It is on the anvil, but we are yet to get the approval of the government. We have about 100 such projects which can be monetised. The idea is to give the already constructed highways to developers under a toll-operate-transfer (TOT) basis. The bidders would give us the money upfront and collect toll for 29 years. They will borrow by securitising the toll. After 29 years, these projects will come back to the NHAI fold again. We expect these projects to fetch us up to Rs 70,000-75,000 crore in the next couple of years.

What about the plan to set up an overseas arm?

Yes, our minister (Nitin Gadkari) is very keen on setting up NHAI International. It will all depend upon which kind of projects we get.”