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Tuesday, Feb 12, 2002

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LIC offers loan for NHDP at 100 basis pts over G-Sec rate

P. Manoj

NEW DELHI, Feb. 11

THE Life Insurance Corporation of India (LIC) has offered to provide a long-term loan for Rs 6,000 crore to the National Highways Authority of India (NHAI) at 100 basis points over the Government of India securities (G-Sec) rates to part-fund the National Highways Development Project (NHDP).

"A proposal submitted by LIC in this regard is being examined by the Finance Ministry,'' the Government sources said.

As per the proposal, the LIC loan would have a tenure of 25 years comprising a moratorium period of 10 years and repayment period of 15 years, the sources said.

Once finalised, this would be the first instance of insurance funds being pumped into the highways sector.

The Rs 54,000-crore NHDP is being developed through receipts from the Rs 1 per litre cess on petrol and diesel at the rate of Rs 2,000 crore annually for ten years, Rs 20,000-crore multi-lateral borrowings from the World Bank and Asian Development Bank, Rs 10,000-crore market borrowings and Rs 4,000-crore private investments.

NHAI is already in the market raising funds through the issue of bonds under Section 54 EC of the Income-Tax Act having tax exemptions from long-term capital gains.

It had raised Rs 656 crore through the bond issues last fiscal and is targeting another Rs 1,000 crore by the end of the current fiscal to fund the NHDP.

The sources said that the market borrowings including the proposed LIC loan would be repaid out of the cess proceeds accruing to NHAI. "The Rs 6,000-crore LIC loan will be a securitisation deal wherein NHAI will be pledging a portion of its future cess receivables with LIC for availing of the loan,'' they said.

In other words, the repayment of the LIC loan will have first priority over the future cess receipts of NHAI.

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LIC offers loan for NHDP at 100 basis pts over G-Sec rate

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