The National Highways Authority of India's (NHAI) big plan for monetising road projects to partially fund the government's ambitious Rs 6.9 lakh crore Bharatmala Project has hit a hurdle. Even before the first Toll-Operate-Transfer (TOT) package of nine operational highway projects in three states is auctioned out, issues have cropped up. Domestic road developers warn that unless the government makes modifications in the terms of references, it may become a failure akin to public-private partnership (PPP) projects.
Among the concerns flagged by the industry are the unviable contract termination, lack of clarity on debt servicing post-contract termination and an economically unattractive outlook. They also want the government to ensure them that a parallel road is not built along the toll road as it could leak toll earnings. They also oppose scattered stretches in different states being offered as a single package.
Funding is another area of concern. Local biggies have demanded state support to raise funds. They are at a disadvantage in comparison with foreign funds which can raise funds at a cheaper rate. The foreign funds can borrow at 8%, adjust it for the rupee and get 11% yield, eventually getting a 300-basis point spread on a long term.
If NHAI doesn't pay heed to the concerns raised, the projects may all be wrapped up by foreign financial institutions.
