Completion of Bharatmala project to pare need of building highways: Gadkari

NHAI is looking at developing a system for capturing returns on appreciation in land value along developed national highways projects, said the Union Minister

One of the most visible face of the Narendra Modi government, Union minister for road transport, highways and micro, small and medium enterprises Nitin Gadkari is a man of action. Lately, however, the National Highways Authority of India, which is overseen by his ministry, is facing flak for being over leveraged. In an interview with Megha Manchanda & Jyoti Mukul, the minister allays fears and says asset monetisation will be the main source of funding for NHAI. Edited Excerpts:

How far has the economic slowdown impacted the highway sector? Is the per day road construction target of 45 km on track?

Yes, absolutely on track. The highways sector has performed very well in the last five years. We awarded a record 59000 km of national highways and constructed more than 43,000 km. From a daily average construction of about 12 km in 2013-14, we are now constructing 32 km a day. Even in this rainy season, we have constructed over 23 km highways every day. I am very confident the sector will continue to perform well in the coming years, too.

Are there signs of revival in private investment and is bank financing available to private road companies?
 

As I have said before, there is no shortage of funds for highways construction work. We are in talks with both State Bank of India and LIC for raising long term credit. Monetization of assets is an option that we are taking up very vigorously. The Government has also taken several initiatives recently to boost the economy. The decision to merge several banks, increase their liquidity and other such measures will have a positive impact on the overall health and financing strength of banks. So, I am very hopeful of financing being available to private builders.

PMO has raised concerns over NHAI borrowings and suggested that the authority should only look at monetization of assets instead of building roads. What is your ministry's response to this?

Let me clarify, the PMO has not raised concerns over NHAI borrowings. In fact, they have only forwarded to us certain suggestions received by them, and asked for our views on the same. However, we do have plans to reorganize NHAI and take a relook at our financing models to further innovate and improve. Asset monetization will be our main funding source in the coming years.

We had good experience in our first toll-operate-transfer (TOT) bundle where we secured Rs 9,700 crore.  NHAI is working on plans to raise a minimum of Rs 85,000 crore. through asset monetization till FY 2024 – 25 through ToT and InvITs (infrastructure investment trusts). All completed projects will be considered for monetization through ToT / InvlTs after two years of operation and all the BoT (Toll) projects will be considered for monetization immediately on completion of the existing concessions. Cabinet approvals have to be sought for these plans.

How does the government plan to bring down NHAI’s contingent liability that has been pegged at Rs 3 trillion?

NHAI is developing an investment model of floating SPVs for value capture financing in respect of Green Field projects.  NHAI has signed an MoU with the National Investment and Infrastructure Fund (NIIF) for formation of an  SPV with equity contribution from institutional financial investors.  We are in the process of gathering market feedback for this model.

Saudi Arabia has offered to invest $100 billion in infrastructure.  The ministry of road transport and highways has suggested that part of this funding could be invested in the SPV being set up by NHAI and NIIF.  These funds could be utilized for construction of Bharatmala expressways.

How does the government plan to reduce that debt? Will you be seeking more budgetary support for the road sector from the Finance Ministry?

After the completion of Bharatmala Pariyojana the need to construct national highways will come down. NHAI would then be more focused on road asset management and include asset monetization, contract management, operation and maintenance of existing highways with capacity augmentation wherever required.

NHAI is working on setting up InvIT to monetize its projects for mobilizing additional resources through capital markets. It is also working to raise long-term finance from banks by securitizing the user fee receipts from fee plazas as an alternate mode of asset monetization. 

NHAI is looking at developing a system for capturing returns on appreciation in land value along developed national highways projects. If NHAI could get a certain percentage of this value, it could be ploughed back for maintaining and upgrading the road assets. Right now the only returns to NHAI are through user fee (toll).

What is the status on reviving the BOT model?

Consultation process has also been started to address shortcomings of the existing BOT (Toll) model so that the required changes can be made in the BOT documents. These projects have faced problems due to delays in land acquisition, utility shifting, tree cutting, limited funding availability in the market and shortcomings on the part of the developers in project management.
 

Further, a need has been felt to assess the viability of projects at a corridor level since individual stretches may not be financially viable but once the corridor is completed, induced and latent traffic would improve the viability of the entire corridor. 

There have been frequent changes in the top post at NHAI. Do you think that has had an   impact on the performance of the authority?

No I do not think so

What is the status of the Bharatmala programme?

So far, total 225 projects having an aggregate length of about 9613 km have been appraised and approved under the Bharatmala Pariyojana phase-I. Projects for over 6,407 km road length have been awarded under the Bharatmala Pariyojana. DPRs are being prepared for projects totalling 25,000 km length. De-congestion projects have been completed for 13 out of 191 congestion points identified, and are under progress for de-congestion of 80 other points. In addition, DPRs are being prepared for resolving issues at 93 congestion points.

The Economic Survey held MSMEs responsible for not creating enough jobs in comparison to big corporates. Do you agree with this view?
 

MSMEs play a crucial role in providing large employment opportunities at comparatively lower capital cost than large industries and are complementary to large industries as ancillary units. The sector comprises of 63.388 million units as per the National Sample Survey 73rd Round (2015-16) and has created 111 million jobs.

What is the government vision or plan for MSMEs? How do you plan to make them into vehicles for economic revival? 

Prime Minister Employment Generation Program (PMEGP) is the flagship program of the Ministry of MSME, generating employment opportunities in rural as well as urban areas of the country through setting up of new self-employment ventures/projects/micro enterprises. The maximum cost of the project/unit admissible under manufacturing sector is Rs 25 lakh and under business/service sector is Rs 10 lakh. During the year 2018-19, 73,427 units have been set up, which provided employment to about 587,416 persons.  In the current financial year 2019-20 (upto 5.9.19), 11,330 units have been set up creating employment opportunities for 90,640 persons.

Further, employment in the Khadi sector has also increased from 465,000 in 2017-18 to 495,000 lakh in 2018-19.  Village industries sector has also witnessed growth in employment from 13.57 million in 2017-18 to 14.20 million in 2018-19. During the year 2018-19, the coir sector provided employment to 7.34 people.

What is the Government vision or plan for MSMEs?  How do you plan to make them into vehicles for economic revival?

The MSME sector has a huge potential for generating income and employment, boosting export and contributing to economic growth.  At present, we are looking at this sector as a major growth engine and source of generating employment.  Currently MSME contributes 29 per cent to the country’s GDP and this will be taken to 50 per cent in the next five years. The sector gives employment to about 110 million people currently, in the next five years it will rise to 150 million.

Is there enough funding available for the MSME sector considering that the financial sector is in a turmoil?

There is a need to create new channels for funding, make the sector investor friendly, bring in technological innovations, reduce logistics cost to make our products competitive, provide adequate skilling and market support.  However, there is an urgent need to think big and energize the sector with new and innovative ideas and out of the box thinking.           

The Finance Ministry has recently announced several initiatives like bank mergers, increasing liquidity of banks, transparent one-time settlement policy, online tracking of loan applications, fast track collaboration for loans between PSBs etc. which will benefit the sector greatly.

For funding, meetings have been held with ADB, World Bank and KfW for their cooperation and have got very positive response.  They will provide low cost funds for the MSME sector.  We must also work with cooperative banks, NBFCs (non-banking finance corporations), credit cooperative societies, SIDBI (Small Industries Development Bank of India) and financial corporations of state governments.