Timely monetisation of road assets critical for funding Bharatmala program: Report

The success of the toll-operate- transfer (TOT) model will be very critical for the ambitious Bharatmala programme especially when the budgetary allocation in the last two budgets has been lower than required, according to a report. While the NHAI borrowing programme is on track, the budgetary allocation in the last two budgets was lower than required thereby necessitating dependence on other funding avenues, the rating agency Icra said in a statement here.

"The timely monetisation of mature road assets will be a critical determining factor in plugging the shortfall in budgetary allocations and fetch requisite funding to support ambitious execution targets set for the Bharatmala programme; failing which the shortfall will have to be met through additional borrowings, thereby further increasing the debt with the NHAI," its AVP and associate head, Corporate Ratings Rajeshwar Burla said.

The overall funding requirement for the new highway development programme is estimated at Rs 6,92,324 crore, which is proposed to be funded through budgetary allocations of Rs 3,43,045 crore over FY19-FY22, market borrowings of Rs 2,09,279 crore, Rs 34,000 crore through proceeds of monetisation through the TOT route and the remaining Rs 1,06,000 crore through private sector participation.

While the NHAI borrowing programme is on track, the budgetary allocation in the last two budgets was lower than required1, thereby necessitating dependence on other funding avenues. Under phase-I of TOT, 75 operational national highway projects totalling 4,376 km have been preliminarily identified for monetisation. Overall, the government expects to mop up about Rs. 34,000 crore from phase-I of TOT.

The Cabinet had approved the Bharatmala Pariyojana phase-I of 24,800 km by FY22. The first bundle under the TOT, which was awarded to Macquarie had a total of nine projects involving 681 km. As against the NHAI's expectation, the initial estimated concession value (IECV) of Rs 6,258 crore, the winning bid stood at Rs 9,682 crore.

Considering that the H1 was higher than the NHAI's estimate by 55 per cent, the first TOT bid was a resounding success for the NHAI. However, the second bundle failed to garner as much response as expected by the NHAI, as a result of which bid deadline was deferred multiple times and finally concluded in December 2018.

The second bundle witnessed three bidders. As against IECV of Rs 5,362 crore, the H1 bid stood at Rs 4,612 crore (from Cube Highways) and H2 (Adani Group) at Rs 3,675 crore. "Unlike the first bundle, there are no stretches along high-density golden quadrilateral corridors for the second bundle and many of these stretches are located in states with relatively lower economic activity and consequently the toll collection potential has been lower for the second bundle when compared to the first bundle. Therefore, it failed to elicit a favourable response in line with the first bundle," Icra said.