The government is expanding its infrastructure, especially the highways, through the Bharatmala programme. It orders for beyond 4,500-5,000 km of roads.
But the present funding of NHAI will not help it complete the project. It needs the additional support of the government and should be backed by a sharp increase in monetization. For this purpose, investors should be attracted.
For that NHAI, and the Ministry of Road Transport and Highways (MoRTH) highlighted the investment opportunity in this sector. Investment points are roads, wayside amenities, and Multi Modal Logistics Parks (MMLPs).
According to the recent meeting, projects worth ₹7tn were likely to be awarded within 2-3 years. While in the road sector, the Central government plans to award ₹200bn worth BOT projects within 2-3 years.
Reports by Kotak Institutional Equities stressed the importance of the participation of private companies to complete projects, such as the Bharatmala programme. The Hybrid Annuity Model (HAM) projects will also require such private help.
The monetization target set by the government, which is to be collected through tolls and Infrastructure Investment Trust (InvIT), is much higher than the past achievements.
They expect to collect ₹400bn through tolls against ₹170bn collected in the past. Through InvIT, they are trying to collect ₹200bn against ₹60bn of the past collection.
Through SPV financing, the MoRTH intends to raise ₹600bn for the greenfield expressways.
The authority was able to raise ₹250 bn for the Delhi-Mumbai expressway by SPV financing. They would look for similar self-sustaining models for similar projects as toll revenues are used to service SPV debt.
On the bright side, toll collection through toll booths has improved rapidly through FASTag. It has reached 97% level. This will improve the monetisation of such road stretches with estimated toll revenues to reach ₹380bn by FY2023.
The government has planned to set up 35 MMLPs at a total project cost of ₹500 bn. They will be developed under the Design, Build, Finance, Operate and Transfer (DBFOT) model. For the project, bids are already invited from Chennai and Nagpur MMLPs.
They are also expected in Bangalore and Indore within the next 2-3 months. To make the programme more investor-friendly, the government has also invited suggestions from the private sector.
The FASTag has helped in increasing the revenue through toll collection but the higher costs of Bharatmala and debt repayment liability will pull down the authority from completely fulfilling the completion of 4,500-5,000 km of highways.
Other projects that would strain their budget if they go alone are the setting up of 35 MMLPs, setting up of roadside amenities, intermodal stations, ropeways and optical fibre network. These are in total worth around ₹7tn.
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