Nitin Gadkari bats for his infra projects, terms them ‘viable’
MUMBAI: The government is set to issue tenders for 3,000 kilometers (km) of roads on build-operate-transfer (BOT) model, Union roads minister Nitin Gadkari said, on expectations that private companies will invest in greenfield projects despite the prevailing risk aversion.
Gadkari, who also holds the portfolios of shipping and micro, small and medium enterprises (MSMES), was speaking at the Mint India Investment Summit and Awards 2020 in Mumbai.
“This morning, we decided to issue tenders for 3,000km of PPP (public-private partnership) roads on the BOT model. We are also planning to open 2,000 petrol pumps on national highways. The land will be from NHAI (National Highways Authority of India) and petrol pumps from the oil companies,” said Gadkari.
Under the BOT model, a private contractor receives concession from the public sector to finance, construct and operate an infrastructure facility. The contractor is allowed to collect tolls over the life of the concession agreement to recover investment, and operating and maintenance costs in the project. About the government’s lower allocation to the road sector for the next fiscal, Gadkari said, “In my department, we are not looking for the government budget. All my projects are economically viable.”
“We have taken some decisions to increase national highways from 96,000km to approximately 2 lakh km,” Gadkari said, adding he is confident that in the next three years, a Delhi-mumbai drive will take just 12 hours.
Gadkari added that he is not in favour of giving government guarantees to privately funded road projects.
“My income is ₹40,000 crore per year. So, I can give support to all the infrastructure projects. So, when investors come to me and tell me they need government guarantees, I tell them
I am ready to give you income for your investment, daily, weekly, monthly, quarterly and half-yearly but I am not ready to give you government guarantees,” he said.
Gadkari said the government is planning to appoint three Indian Institutes of Technology (IITS) to study the technological aspects of making pre-cast roads, bridges and tunnels. In a few months, all bridges and roads in the country may have to be mandatorily pre-cast, he said.
SBICAPS Securities estimates that in FY20, toll collection for
NHAI’S operating roads grew at a very modest pace of 6% per km (from ₹5.5 million/hectare in FY13 to ₹8 million/hectare now). “Revenue collection barely covers the interest servicing cost of these projects, let alone project returns. Thus, there is rising concern on debt servicing. NHAI’S outstanding debt of ₹1.8 trillion could entail interest servicing of ₹120-140 billion, which compares with ₹100 billion of NHAI’S toll collections during the year,” SBICAPS report said.
“My target is to increase the toll revenue to up to ₹1 lakh crore per year in the coming five years,” the minister said.
The government is also looking at new options of fundraising to recycle NHAI’S capital. Gadkari said NHAI is raising funds through successful TOT auctions of public roads.
In the past, Gadkari has also expressed intent to raise ₹15,000-20,000 crore in the NHAI’S maiden INVIT offer in the coming financial year.