NHAI not financially stressed has PMO backing
Nitin Gadkari said that revenues from NHAI roads were on the rise and traffic density was expected to increase.
“The National Highways Authority of India (NHAI) is not financially stressed,” Nitin Gadkari, Union minister for road transport and highways, repeated this statement several times at a press conference in Mumbai on Monday. “These media reports on NHAI’s finances being stressed are untrue.”
“You should go by my track record; I have always been able to raise money for project, be it Mumbai-Pune Expressway or Bandra-Worli Sealink. We have very healthy internal rates of return; there is no problem for money,” said Gadkari, who was in the city to discuss the first 100 days of the Narendra Modi government.
To a question from Mint on NHAI’s debt touching the ₹2.5 trillion mark by the end of the year, with interest payments soon outstripping annual toll income, Gadkari insisted that revenues from NHAI roads were on the rise and traffic density was expected to increase. “Even in times of a slowdown, our traffic density expectations are rising. The finance minister has asked me to keep awarding road projects. So from now to April 2020, I will award new road projects of up to ₹5 trillion.”
In August, Mint had reported that Nripendra Misra, principal secretary to Prime Minister Narendra Modi, wrote to Sanjeev Ranjan, secretary, ministry of road transport and highways, suggesting that NHAI consider becoming a road asset management company without actually holding road assets or building any more of its own. Gadkari said this document had been leaked by an official within the ministry who has since been suspended. “I have the full backing of the Prime Minister Office’s to keep investing in roads,” Gadkari said.
Till recently, developers had been struggling with the financial closure of new projects, which if why NHAI had to slow down the speed at which it was awarding these projects, Gadkari said. “Now, banks are willing to lend money and they are asking that they will lend to new projects as soon as they become available. I have assured them that NHAI’s roads are safe assets.”
“We have enough money coming from foreign pension funds, private equity funds who want to buy roads (under the toll-operate-transfer model),” Gadkari said. “I do not need additional budgetary support to build more roads.”
Despite the minister’s statements, NHAI’s construction cost has surged in the last 5 years, led by a 30% annualised growth in average land acquisition cost from 6.8 million/hectare in FY13 to 34 million/hectare now, SBICap Securities said in a 23 August report.
Land purchase costs increased as the company had to comply with the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013. The report said the proportion of debt funding has risen sharply in the recent NHAI projects while “At the same time, toll collection has grown at a very modest pace of 6 per cent for a km (from ₹55 lakh a km in FY13 to ₹80 lakh in March 2019). Hence, revenue collection barely covers the interest servicing cost of these projects, let alone project returns. Thus, there is rising concern over debt servicing,” the report said.
The NHAI’s payment outgo on account of interest is expected to be about ₹25,000 crore annually for the next two decades or so.