EGoM to suggest routes to raise funds for NHAI

In its first meeting on Monday,the newly-constituted empowered group of ministers (EGoM) for the roads sector will take stock of the finances available....

In its first meeting on Monday,the newly-constituted empowered group of ministers (EGoM) for the roads sector will take stock of the finances available and also discuss ways to meet the funding requirement of National Highways Authority of India,estimated at estimated at Rs 47,736 crore,for 2010-11. NHAI has targeted executing road projects that are 11,092 km in length.

Of the total amount required,about Rs 9,000 crore is expected to come from cess on petrol and diesel in the next fiscal and another Rs 2,000 crore from capital gains tax exempt bonds. IIFCL funds worth Rs 10,000 crore may also be made available to the NHAI,while roughly Rs 4,600 crore funding from the World Bank is in the pipeline. Another Rs 6,000 crore is expected to come from LIC but this will be spread over a number of years.

It is for the balance amount that the EGoM will take a call on the exact mix of instruments that the NHAI may access for its ambitious road development target. EGoM members including finance minister Pranab Mukherjee,road transport and highways minister Kamal Nath and deputy chairman Planning Commission Montek Singh Ahluwalia will look at some of the possible sources of finance approved by the BK Chaturvedi Committee.

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The instruments approved include tax free bonds with 10 years maturity,loans from insurance companies such as UTI,infrastructure bonds,market borrowing and loans from domestic financial institutions. The EGoM will clear the decks for the NHAI to go ahead with its borrowing plan keeping in mind the liabilities that it will incur in the form of interest to be paid.

However,the borrowing requirement may actually come down if economic recovery continues. Of almost 15 bids received this year about 7 have refrained from asking the government for a negative grant or viability gap funding. This is a welcome change in the bidding pattern as last year there were only two bids that did not ask for any financial support from the government, government officials told The Indian Express.

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