India to raise $1.9 bn debt for building highways

November 28, 2011

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India will soon raise Rs.10,000 crore ($1.9 billion) through a public debt issue for funding its ambitious national highways project, union Road Transport and Highways Minister C.P. Joshi said Wednesday.

“The finance ministry has allowed us to raise Rs.10,000 crore through debt bonds for funding construction of highways across the country,” Joshi told reporters on the margins of a trade event.

The state-run National Highway Authority of India (NHAI) will raise the fund through tax-free infrastructure bonds within a month. “The proposed fund-rising will be sufficient for the highway projects under execution. We will raise more funds as we go for more such projects,” Joshi said after unveiling the sixth international construction equipment industry trade fair Excon 2011 on the outskirts of this tech hub.

In the budget for this fiscal (2011-12), Finance Minister Pranab Mukherjee made a provision for the first time to allow NHAI to raise funds as government’s share of financing the roads sector.

Though the highway authority planned to raise the amount through private placement earlier, rising interest rates had forced it to opt for the public issue.

The proposed fund will be used to partly finance highway projects to be executed on build, operate and transfer (BOT) basis and for viability gap funding through which the government pays to make the projects viable financially.

Under the BOT model, the winning bidder will build the highways and the government will pay in installments.

The authority has awarded till date 59 projects covering a distance of 7,994 km that is estimated to cost a whopping Rs.60,000 crore (Rs.600 billion).

“To achieve the target of building 20 km of road a day set by the prime minister (Manmohan Singh), the highway authority has to award 7,300 km for every three years consecutively,” Joshi pointed out.

Admitting that only 4,600 km was awarded during this fiscal, Joshi said the target of 20 km per day would be met by 2014.

“We have not been able to achieve 20 km per day but we are confident of doing it before the next general elections,” Joshi added.