Government eyes Rs 1 lakh crore in highway auction

NEW DELHI: In a first of its kind move, the road transport ministry is looking to auction about 5,000 km of government-funded national highway stretches nearing completion in a bid to attract overseas investors and generate resources to construct more roads across the country.

The ministry is hoping to mop up around Rs 1 lakh crore through the auction from investors such as private equity players and pension and insurance funds, road transport and highways minister Nitin Gadkari told TOI in an interview. The government's investment to develop these stretches is estimated at Rs 40,000-50,000 crore.

The move comes at a time when Indian players are reluctant to invest in the road sector, citing large debt on their books and the failure of the government to ensure availability of land for several projects. The government has launched an exercise to get road projects moving.

Gadkari said the auction will increase availability of funds to undertake more projects both on government funding mode and hybrid annuity, a new mode for public private partnership (PPP) projects. "We are confident of getting major foreign investment as pension fund and insurance fund managers will find these projects attractive. Since the projects will be auctioned for certain years after construction, they face no risk of construction and tolling can start from day one," he added.

TOI had first reported on January 15 that the ministry is considering a plan to auction highway stretches. Countries including South Korea and some in Latin America have auctioned highway projects and received large investments.

Sources said officials have been asked to prepare a basket of good quality stretches where traffic growth is robust. "We would auction the projects after identifying them. Ideally length of each stretch should be at least 200 km with a minimum guaranteed return (MGR). We would fix the reserve price of a project while inviting tenders. This can be calculated based on the investment in construction and the minimum likely toll that government could get for certain years," said an official.

Gadkari said this will be one of the issues that will be discussed at a consultation meeting with all stakeholders in the highway sector including potential bidders, companies and financial institutions. Gadkari is confident that both Prime Minister and finance minister will attend the event.