ManagementSovereign guarantee to NHAI on per case basis
Providing a sovereign guarantee to the National Highways Authority of India’s (NHAI’s) borrowings will be decided on a case-to-case basis by the finance ministry.
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This was decided by the Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, which met on Monday. It agreed to leave the decision to the finance ministry.
However, industry sources feel this move to provide sovereign guarantee on a case-to-case basis could make things complex, hampering the ambitious plan of building roads at 20 km a day and bridge the infrastructure gap.
The B K Chaturvedi committee, constituted to suggest ways to expedite road projects, had suggested sovereign guarantee to all NHAI’s borrowings. Doing so would bring down the interest rate charged by around 1.5 per cent.
NHAI will borrow around Rs 192,000 crore, with a peak-level borrowing of Rs 71,500 crore, till 2031 to finance projects on Engineering, Procurement and Construction (EPC), on Build, Operate and Transfer (annuity) basis and fund viability gap funding.
In the EPC project, the contractor builds the road and the government pays; in annuity projects, the contractor build the roads and the government pays at specified periods, every six months or a year. Viability gap funding is the money provided to the concessionaire to make a project profitable for him to build and it can be up to 40 per cent of the total project cost.
NHAI gets over Rs 16,000 crore from cess charged on petrol and diesel, toll collection and budget allocation.
Among other decisions, the EGoM approved the Work Plan-II for 2010-11, with a condition that 60 per cent of the project will be on public-private partnership (PPP), that is on BOT (toll), 25 per cent on BOT (annuity) and the rest under EPC. It also asked the authority and the ministry to identify the stretches to be awarded on EPC.
Work Plan-II is a plan prepared by the NHAI for 2010-11 in which it plans to award 92 projects worth around Rs 1 lakh crore. The authority’s plan for the first year (2009-10) to award over 122 projects worth Rs 1 lakh crore would not be completed by the end of March 2010, and the government has given three months ex tension for this.
The EGoM asked the Public-Private Partnership Appraisal Committee (PPPAC) to make annuity projects more profitable. Also, the road transport ministry has been asked to give a note on the status of the progress on the restructuring of NHAI.