The success of the toll-operate-transfer (TOT) model will be very significant for funding the government's ambitious highway development programme Bharatmala, rating agency ICRA said Thursday.
"The timely monetisation of mature road assets will be a critical determining factor in plugging the shortfall in budgetary allocations and fetch requisite funding to support ambitious execution targets set for the Bharatmala programme, failing which the shortfall will have to be met through additional borrowings, thereby further increasing the debt with the NHAI," ICRA said.
"In this context, success of the toll-operate-transfer (TOT) will be very significant," it added.
TOT is a model for monetising operational national highway projects where investors make a lump sum payment in return for long-term toll collection rights backed by a sound tolling system.
The overall funding requirement for the new highway development programme is estimated at Rs 6.92 lakh crore, which is proposed to be funded through budgetary allocations of Rs 3.43 lakh crore over 2018-19 to 2021-22, market borrowing of Rs 2.09 crore, and Rs 34,000 crore proceeds of monetisation through the TOT route.
The remaining Rs 1.06 lakh crore is expected to come through private sector participation.
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"A majority of the Bharatmala programme is expected to be undertaken through the National Highways Authority of India (NHAI). While the NHAI borrowing programme is on track, the budgetary allocation in the last two Budgets was lower than required (Rs 72,010 crore for 2019-20, around 21 per cent lower than what is required), thereby necessitating dependence on other funding avenues," said Rajeshwar Burla, AVP and associate head, corporate ratings, ICRA.
The Cabinet had earlier approved the Bharatmala Pariyojana Phase-I along with other programmes involving around 83,000 km of national highway development by 2021-22.