Centre weighs fund-raising options to meet viability gap for road projects

Centre weighs fund-raising options to meet viability gap for road projects
The Financial Express, September 3, 2009, Page 12

Ashutosh Kumar, New Delhi

With an ambitious plan to award road projects worth Rs 2,00,000 crore in the next two years on public-private partnership (PPP) basis, the government is looking at various options to raise funds and set up a line of credit to meet the viability gap funding (VGF) and annuity payment requirements, among others.

Furthermore, the government may allot a part of the Rs 10,000 crore tax-free bonds raised by the India Infrastructure Finance Company Ltd (IIFCL) directly to the National Highways Authority of India (NHAI) for refinancing of the road projects.

“Since the fund mobilised from the first tranche of tax-free bonds is lying idle with IIFCL, a part of it could be provided directly to NHAI for refinancing its projects,” said an official close to the development. Without revealing details on the quantum of funds that will be provided and time of its implementation, the official said, “The issue may be taken up as an option for meeting NHAI requirement. As of now no final decision has been taken on this front.”

However, a top road transport and highways ministry official said that the move is being considered and NHAI may get the money directly from IIFCL as and when need arises. NHAI, which will require a buffer of around Rs 80,000 crore for outgo on VGF and other requirements, is also weighing the option of raising deep-discount bonds. These bonds will be sold at discount from their par value. “The bonds are issued for a period of 20 years. They come with the options of yearly interest and maturity. Banks and financial institutions that have long-term repayment liability can avail these bonds,” said an NHAI official.

“The bond proceeds will be used for meeting VGF needs, ongoing engineering procurement contract, pre-construction related expenditures, payment of annuity bills, and servicing future borrowings,” said the National Highways Authority of India official.

Incidentally, NHAI could till date raise only Rs 220 crore from the Rs 4,000-crore 54 EC bond which it issued in May this year. Officials, however, are optimistic of garnering more funds by the end of current fiscal year.

The authority also plans to approach Life Insurance Corporation to seek loan.

“We are likely to initiate negotiation with the LIC after December. By that time, we will have a clear idea regarding requirement of additional funds. In case of need, we will seek loan from LIC,” said the official.