NHAI raises Rs 8,500 crore from LIC to speed up bypass construction

NEW DELHI: The National Highways Authority of India (NHAI) has raised Rs 8,500 crore from Life Insurance Corporation of India ( LIC) for 30 years at an interest rate of 7.22% per annum. The funds will be used to construct bypasses on national highways and road expansion projects. The NHAI is seeking over Rs 1 lakh crore from the state-owned insurer to be disbursed in tranches over five years, according to a senior roads ministry official.

“We have received the first tranche of funds from LIC at a very economical rate. We could get another tranche as and when need arises. These funds would be used for expansion plans of the authority,” the official said.

Another government body, the Employees’ Provident Fund Organisation, has subscribed to NHAI bonds worth Rs 10,000 crore for 25 years at 8.03% interest. ET had reported earlier that the ministry was in talks with LIC and EPFO to raise funds for highway expansion projects. The finance ministry has allowed NHAI to borrow Rs 50,000 crore through bonds in the current financial year.

The authority received a lower share of the fuel cess this year from the ministry of road transport and highways even though it had a bigger highway construction plans this year.

NHAI has bid out 5,000 km of roads worth about Rs 75,000 crore in the first eight months of the current financial year. This year’s target of more than 7,000 km of roads worth about Rs 1 lakh crore will be the highest ever awarded by NHAI. Last year, the authority constructed about 2,000 km of four-lane roads and this year it plans to build about 4,000 km of four-lane roads.

The finance ministry allocated Rs 59,000 crore, including Rs 2,100 crore as additional grant, to the roads ministry for current year. The authority is also looking to raise Rs 7,000 crore through masala bonds to be listed on LSE.

ET View: Step Up Investment
The move makes perfect sense. We do need to purposefully step up investment to boost the growth momentum going forward. It is all the better if funds can be raised in a regime of fiscal prudence. The way ahead is to have tolling on the bypass projects, preferably seamless e-tolling, for transparency in revenue collections and payback. It may also be possible to securitise toll receivables for plough back into the highways sector.