Budget 2016: Road ministry to seek Rs 50,000-crore soft loan from LIC for expressways

NEW DELHI: The road transport and highways ministry plans to tap funds from the country’s largest financial entity, Life Insurance Corporation of India, to undertake its ambitious expressways development programme.

The roads ministry is likely to seek a loan of above Rs 50,000 crore from LIC on soft terms, a senior transport ministry official said. Road transport minister Nitin Gadkari has already given his nod for the plan and the proposal will soon be taken up with LIC and finance ministry.

“We’ll seek similar conditions as LIC has offered to railways, such as the loan to be given in tranches and the interest rate to be kept around G-secs,” the official said. As per Union Budget proposals, government plans to award road construction contracts for a little over 10,000 km of highway next financial year.


Also, 50,000 km of state highways would be upgraded to national highways, which would entail a significant investment.
On Monday, finance minister Arun Jaitley had allocated Rs 55,000 crore as budgetary grant to the roads ministry. Jaitley has also allowed National Highways Authority of India (NHAI) to raise tax free bonds worth Rs 15,000 crore.



The roads ministry had sought around Rs 85,000 crore from the finance minister.

With the budgetary allocation, the roads ministry would be able to construct only 7,000 kilometres of highways. The remaining expansion plans would have to be undertaken through extra budgetary support like loan from LIC and public-private partnerships.

The ministry has lined up 16 expressway projects out of which 10 worth Rs 40,000 crore have already received cabinet nod. The ministry will identify the commercially viable high traction projects to be funded through LIC loan, the official said.

Last year, Indian Railways had sought a loan of Rs 1.5 lakh crore from LIC to invest in its capacity expansion plan.

Jaijit Bhattacharya, partner at KPMG, said, “All large scale infrastructure projects need low cost financing to be viable. Raising loan through LIC would reduce government’s dependence on exchequer. Road projects are positioned better to leverage from LIC loans.”

The roads ministry has a target of doubling the country’s highway length to 2 lakh kilometres. To achieve this, the ministry has prepared an ambitious investment plan of Rs 2.67 lakh crore.

To raise resources for the highway development plan, the government is also planning to lease out 104 of its completed highway projects, currently being operated by NHAI, to investment funds on toll-operate-transfer (TOT) basis