NHAI's maiden infra investment trust plan unlikely to see foreign interest

The National Highways Authority of India’s (NHAI’s) maiden infrastructure investment trust (InvIT) plan is unlikely to see foreign interest, said road developers. In a meeting, road firms told the government they were not keen on the new build-operate-transfer (BOT) model.

“Dollars are interested in the toll-operate- transfer (TOT) model; the NHAI’s InvIT will have to depend on the Indian rupee (domestic funding),” said a road development company’s top official, who was at the meeting chaired by Nitin Gadkari, the Union minister for road transport and highways, in Mumbai on Monday.

“Foreign funds will not be comfortable investing in an InvIT, where the NHAI is the sponsor, owing to concerns over how a government authority will maintain assets,” said the official quoted above. “There is a huge difference between private-run and the NHAI-run toll plazas,” he said.

The minister met bankers, foreign investors and road developers as part of a road show for the NHAI’s monetisation of a third bundle of roads under the TOT model. The model involves investors bidding for the tolling rights of a bundle of the NHAI projects for a period of time. It involves an upfront payment to the NHAI.

Jayant Mhaiskar, chairman and managing director, MEP Infrastructure Developers, said: “We do not have details and it is difficult to comment on foreign interest, but the NHAI’s version of an InvIT may be very different from that what companies have offered as InvIT so far.”

Mhaiskar described the meeting as an interactive one, where various concerns were discussed. “Members from my team were there, and it was an interactive meeting. I understand amongst other things discussed was the new BOT model,” he added.

The BOT model requires road developers to fully finance and build the road asset, collect toll for a pre-decided period and return it to the NHAI at the end of the period. The last few years have seen the NHAI move away from BOT and towards the hybrid annuity model (HAM) model. Road companies had earlier faced heavy losses owing to the aggressive BOT bidding.

“Road developers are comfortable with a combination of TOT and HAM. Finance is a big issue and not many are keen on the BOT model,” said the official quoted earlier.

Under the HAM model, road developers are paid 40 per cent of the construction cost upfront and they need to finance the residual component.

The central government has envisaged an investment of Rs 100 trillion in the infrastructure space. Industry experts agree the government will need more private investment to be able to meet this ambitious target