Ultimate ownership of Delhi-Mumbai Expressway will remain with NHAI

SPV to take over financial liabilities, but traffic risks remain with NHAI

A special purpose vehicle (SPV), DME Development, would get the road assets of the marquee Delhi-Mumbai Expressway, but the ultimate ownership and contract terms would continue to be in the name of the National Highways Authority of India (NHAI), officials told Business Standard.

They said legal formalities for the transfer of the assets, operation, and maintenance liabilities were underway and would be completed by the year-end. 

The Union government is also in discussion with the Maharashtra government to bear the land acquisition cost of a spur road that would connect the expressway with Mumbai’s Jawaharlal Nehru Port Trust (JNPT).

The newly-formed SPV would be responsible for the largest greenfield expressway during its entire life cycle, though its relationship with the NHAI would be different from the previous SPVs floated for privately-funded projects. 

DME Development, for instance, would raise debt on its balance sheet like any other highway SPV, though the NHAI would retain operational control. Similarly, toll collection on the entire stretch would be done by the SPV through its own agents, but the collection would accrue to the NHAI. And similar to the annuity model of construction, DME Development would get annuity payments from the highway authority without the company taking any construction and tolling risks.

The NHAI decided to go alone after its discussion with the National Investment and Infrastructure Fund (NIIF) failed. The NIIF wanted government-owned entities like Life Insurance Corporation and State Bank of India to put in money in the SPV floated by it. Besides, it was also asking that the existing national highway number 8 be bundled with the expressway project. “This was increasing our costs while not taking care of the risks,” said an official, who did not want to be named.  

Since traffic risks would not be borne by the SPV, even though volumes on this route are expected to be high, fundraising would not be difficult for the project. The official quoted above said “it was a jewel” and attracting equity or debt funding for the SPV would not be a big task.

The expressway has 48 construction packages, of which 31 would be in the government-funded EPC (engineering, procurement and construction) mode and 17 in the hybrid annuity mode, involving private equity as well.

“Most of the hybrid annuity model (HAM) project awards have been done with only four-five projects awaiting award. We are now in discussion with the Maharashtra government for a 74-km spur road from the Vadodara-Mumbai stretch that would link JNPT,” said a senior official.

Though the spur crosses a densely populated region, the City and Industrial Development Corporation (CIDCO) is in the possession of the crucial land parcel. “If the Maharashtra government agrees to bear the cost of land acquisition partially, the spur connecting the JNPT would be a game changer for movement of goods via roads,” he said. It would be possible to move goods in 12-13 hours, instead of the current 30-32 hours.

The SPV, wholly-owned by the NHAI, would finance, construct, and operate the expressway. “By floating the SPV specific to a corridor, the NHAI is aiming at diversifying its resource base and developing a sustainable and self-liquidating approach to raise finances,” the authority had said in a recent statement.

The 1,275-km expressway, expected to be completed by March 2024, is not only the flagship project of the ministry of road transport and highways, but will be a test case for floating similar SPVs.

To start with, the expressway would have eight lanes, with adequate land to expand it to 12 lanes in the future. The design speed would be of 120 km/hour with complete access control with a closed tolling. A network of 75-wayside amenities is also planned on either side of the expressways at an interval of 50 km.