At Rs 1.75-lakh cr, investment in highways soars in last 3 years

Our Bureau New Delhi | Updated on October 12, 2012 Published on October 12, 2012


A whopping Rs 1.75-lakh crore has been spent on highway projects over the last three years, which is thrice of what the sector absorbed in the preceding seven years, from 2003 to 2009.

This is according to estimates by National Highway Builders Federation (NHBF), a body of road developers, for national highway projects taken up on public private partnership (PPP) basis, where funds are raised mainly by private companies.


The sudden spike in fund requirement partly explains the banking sector’s plea that it is close to reaching the funding limit for the highways sector.

Indian banks had to lend at least Rs 1.3-lakh crore during the 2009-10, 2010-11 and 2011-12. Some of the fund has already been disbursed, but many of the projects awarded last year are yet to achieve financial closure.

The sudden rise in demand of funds means 38 projects awarded last fiscal are yet to achieve financial closure, and some 20 developers have sought more time to do so.

For instance, GMR Infrastructure had to raise funds from 22 banks for developing the 555-km Kishangarh-Udaipur-Ahmedabad highway, which is the largest project to be taken on PPP basis.

“The estimates for many projects in the last three years are provisional and the actual fund requirements could be higher due to a rise in input costs,” points out M. Murali, Director-General, NHBF. Additionally, costs would also have gone up for many projects that are delayed due to land acquisition or environment clearance issues.

Higher costs

For the seven-year period of fiscal 2003 to fiscal 2009, highway developers required Rs 40,544 crore. In this context, to increase funds flow in the sector, developers have been trying to get the Government to relax project exit norms, and arrange long-term debt finance.

During the last ten years, a total of Rs 2.3-lakh crore has been invested in the sector on PPP basis, out of which 23 per cent has been brought in as equity by developers, 73 per cent is debt, and about 3 per cent has come in as foreign direct and private equity investments. In PPP projects, companies recoup the investment by collecting toll, or user charge, from highway users over 15-25 years. In some projects where the toll is not collected or is collected by the National Highways Authority of India, developers get payments twice a year, called “annuity”, from NHAI.

PwC estimates that over 18,000 km highways have been awarded on PPP basis in the last ten years.

The total kilometres awarded per year has gone up by 7-8 times. But in the backdrop of recent cases where people have protested against paying toll charges year after year, questions have been raised on the extent to which the Government should depend on the PPP mode.

“People are unwilling to pay toll charges that keep increasing every year while the wait at toll plazas gets longer,” Athar Shahab, CEO, Uniquest Infra Ventures said recently.

> mamuni.das@thehindu.co.in

Published on October 12, 2012
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