Cabinet authorizes NHAI to set up infrastructure investment trust

Updated on Dec 12, 2019 07:22 AM IST

The Cabinet, chaired by Prime Minister Narendra Modi, also authorized NHAI to reserve the right to levy toll on identified national highways.

The cabinet approval has come at a time when NHAI is reeling under a debt of nearly Rs 2 lakh crore.(Mint/ Representative Photo)
The cabinet approval has come at a time when NHAI is reeling under a debt of nearly Rs 2 lakh crore.(Mint/ Representative Photo)
Hindustan Times, New Delhi | By

The union Cabinet on Wednesday authorized the National Highways Authority of India (NHAI) to set up an Infrastructure Investment Trust to monetize highway projects that have a toll collection record of at least one year.

The Cabinet, chaired by Prime Minister Narendra Modi, also authorized NHAI to reserve the right to levy toll on identified national highways.

The cabinet approval has come at a time when NHAI is reeling under a debt of nearly Rs 2 lakh crore.

According to the Investment Information and Credit Rating Agency (Icra), a credit rating agency, NHAI’s total outstanding debt will increase to Rs 3.30 lakh crore by March 2022.

“Using new and innovative financing vehicles has become inevitable for organisations like NHAI that have limited existing sources of funds. The then Finance Minister, in his Budget Speech of year 2018-19, had stated that NHAI may consider organizing its road assets into Special Purpose Vehicles and use innovative monetizing structures such as Toll, Operate and Transfer model and Infrastructure Investment Trusts (InvlTs),” the transport ministry said in a statement Wednesday.

The InvIT will be established under the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

“InvIT as an instrument provides greater flexibility to investors and is expected to attract patient capital to the Indian highway market, as these investors are averse to construction risk and are interested in investment in assets which provide long-term stable returns,” the ministry said.

In a bid to monetize its assets, the NHAI has also bid out four bundles of road assets to be auctioned under the toll-operate-transfer (TOT) model. Under the TOT model, long-term concessions for collecting toll revenues are auctioned to the highest bidder.

“Given the magnitude of the Bharatmala program, NHAI would need adequate funds to complete the projects within the prescribed timelines. As a part of this exercise, a workable option is to monetize the completed and operational NH assets to unlock their value and offer attractive schemes to private players to invest in construction of National Highways,” the ministry said.

HT in November 2018 had reported that PM Modi’s Rs 5.35 lakh crore Bharatmala Pariyojana, an umbrella project launched in 2017 and hailed as India’s biggest highways development plan, is beset by delays at multiple implementation stages amid funding shortages.

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