Economic Times: January 09, 2017
Mumbai: The government’s decision to allow NHAI to monetise road projects will help gather funding to build around 2,700 kms of highways, rating agency ICRA said in a report.
The agency cautions that unlikely to meet the award and execution target for 2016-17 but added that the road sector has witnessed resurgence in recent quarters due to several policy initiatives, which is credit positive.
In August 2016, the Cabinet Committee on Economic Affairs authorised the NHAI to monetise public funded national highway projects, which are operational and are generating toll revenues for at least two years after the commercial operations date through the toll-operate-transfer (TOT) model. According to ICRA, the total value of 75 projects proposed to be awarded through TOT is estimated at Rs 35,600 crore. Assuming the average cost to the NHAI is Rs 13 crore per km for a four-lane project, the proceeds from monetisation through this route can be used towards road construction of around 2,700 km.
“Given the wide variation in toll collections, the attractiveness of certain stretches with long vintage and established traffic volumes is much more when compared to the ones with less operational track record and weak toll collections. In this context, it makes sense to bundle the projects so that weaker projects are not left out and NHAI could also consider keeping floor and cap so that the bidding is not very aggressive in case of attractive stretches,” said K. Ravichandran, Senior Vice President and Head, Corporate Ratings at ICRA.
“Geographically diversified stretches are good for the NHAI so that weak and strong projects can be bundled. However, from the developer’s perspective, they will be more interested in contiguous stretches, given the operational synergies/ scale benefits,” he said.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.