Plan panel sees lapses in NHAI bond issue

The Planning Commission is suspecting irregularities in the sale of Rs 10,000 crore tax-free bonds launched by the National Highways Authority of India in December 2011. Moushumi Das Gupta reports. Bond details

The Planning Commission is suspecting irregularities in the sale of Rs 10,000 crore tax-free bonds launched by the National Highways Authority of India in December 2011.

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The plan panel has complained to the road ministry that the NHAI had fixed a high commission ("1.2%") to brokers who sold the bonds to qualified institutional bidders (QIB) and high networth individuals (HNI).

This deviation resulted in a Rs 110 crore burden on the public exchequer, Gajendra Haldea, adviser to Planning Commission deputy chairman Montek Singh Ahluwalia, wrote in a letter to road transport secretary AK Upadhyay on January 12.

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"Since the public exchequer has been subjected to a burden of Rs 110 crore in the form of excessive commissions, a detailed evaluation … seems necessary to determine whether there was any malfeasance or negligence," Haldea said in the letter. Haldea also said: "In absolute terms, this meant a liability of R120 crore."

The road transport ministry has called for an explanation from the NHAI, which is headed by Upadhyay himself.

The NHAI had allocated 70% of its public issues for QIBs and HNIs while 30% was allocated for retail investors.

SBI Capital Markets Ltd and AK Capital Services Ltd were the lead managers to the issue.

Haldea said he had flagged these concerns to road ministry officials and advised the NHAI that the commission it had decided to pay brokers was "unnecessary" and "excessive".

In his letter, a copy of which he marked to top finance ministry officials, he said "such high commissions also have a potential for corruption and malpractices".

But, the ministry made only a marginal reduction in respect of QIB investors only.

"The issue that arises is whether or not the requisite due diligence was undertaken before committing the public exchequer to a burden of Rs 110 crore in the form of commissions … it was known all along that the demand for these bonds was far greater than their supply and the competitive markets would have, therefore, delivered the same outcome with a far lower level of commissions, especially in the case of QIB and HNI investor," Haldea's letter said.