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Wednesday, December 02, 2020

Fund crunch: RoadMin looking at new models, financing options

Ministry officials say that about Rs 45,000 crore has been sought in this year’s Budget, with an additional dedicated fund of about Rs 11,000 crore for projects in LWE areas.

Written by Siddhartha Gupta | New Delhi | February 19, 2015 2:08:54 am

With PPP mode taking a beating and public-funded road projects in the front seat, the roads ministry is facing a tough year ahead staring at a severe fund crunch, especially as private sector investment continues to elude the sector.

Ministry officials say that about Rs 45,000 crore has been sought in this year’s Budget, with an additional dedicated fund of about Rs 11,000 crore for projects in Left wing extremism (LWE) areas. The ministry has also reportedly proposed an increase in cess on petrol and diesel, proceeds from which go directly to the Central road fund.

To attract private sector investment, the ministry has also come up with a hybrid BOT annuity model, wherein the government will fund up to 40 per cent of the total project cost and assume complete risk associated with revenue collection. The target is to reduce the risk associated with traditional BOT models.

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“We have already identified 13 projects to be executed on this model. These will be brought into the bidding framework by the end of this fiscal and will be awarded by the end of June,” said roads secretary Vijay Chhibber at a conference on the hybrid model organised by the Confederation of Indian Industry (CII). Most of these projects are from NHDP Phase IV.

Ministry officials also say that within the next 2 weeks, the Cabinet is likely to approve a plan to infuse 16 languishing road projects with Rs 4,500 crore to push them to completion, in addition to approving the divestment and subsequent exit of private players across 80 completed projects.

According to the current financial plan of the National Highway Authority of India (NHAI), it is likely to take on a debt of approximately Rs 1.8 lakh crore over the next three fiscal years to meet its targets, most of which are on EPC mode. The authority estimates that almost 21,000 hectares of land will have to be acquired in the next two fiscal years, which will set it back further by at least Rs 52,000 crore.

The authority expects to be debt free only by 2027, with its cumulative external borrowings expected to peak at about Rs 1.94 lakh crore by the end of March 2019.

“Our focus continues to remain on reducing the total project cost via improved design and construction methods. Unfortunately, developers don’t seem to care about this aspect,” roads minister Nitin Gadkari said.

He has said earlier that the government is also looking to raise money through various channels such as pension funds, infrastructure bonds, foreign investment and toll income to help the cash-starved sector.

The ministry aims to award 20,000 km in the current and the next financial year, 15,000 km of which are to be executed by the NHAI. A total of only about 6,600 km have been earmarked for execution on BOT mode, due to the “indifferent response to BOT/PPP projects by developers,” as noted by the NHAI.

The past year has been a tough time for the roads sector with many BOT projects receiving no bids. Twenty two mega-projects worth over Rs 1,000 crore each continue to face delays, and 36 projects have been foreclosed.

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