NHAI must make monetisation a structured programme: Vijay Chibber, former secretary, ministry of highways

Borrowing is not an independent activity of the NHAI. It is a part of the government’s borrowing activity, says former secretary at the ministry of highways Vijay Chibber


Former secretary at the ministry of highways Vijay Chibber says he is not unduly concerned about the National Highways Authority of India’s (NHAI’s) financial condition, which many analysts believe is precarious. NHAI’s borrowings are all part of a planned programme, Chibber tells Surya Sarathi Ray.

Do you subscribe to the view that NHAI should stop highways construction and concentrate on road asset management?

NHAI is a government agency created only for the purpose of aggressively rolling out massive highway construction programme of the country. As far as asset management is concerned, it is already into it. Managing assets is a very delicate task. The suggestion on monetising of the assets is welcome. This is the only part of the suggestion that had been sent to the PMO which actually merits focus and consideration. The ministry and the NHAI are slow in monetising assets. In 2014–15, when we decided to ramp up much larger portfolio of road asset, the financial plan very clearly included some revenues coming out of monetisation.

The ministry and the NHAI should bring monetisation as a very structured progamme so that the market is aware of what is being brought for monetisation. The government should not have any difficulty in monetising these assets.

Aren’t you concerned about NHAI’s rising borrowings and interest payment burden?

The extent of borrowing is approved by the finance ministry before the financing plan is finalised for the year. The borrowings are included in the Budget and approved by Parliament. I am a little surprised that there are alarms on the borrowing figure. The decision is taken by Parliament and not by the highway ministry or the NHAI.

Every money coming in and going out is being mapped by the finance ministry. The mapping is on for the next 10–15 years. The ministry is aware of the income and expenditure for the current year and also for the next 15 years. It is after this data, the financing plan is drawn up. Based on that, the ministry lays out the borrowing plan — higher for a year when it can’t give more and lower on a year when it gives more. So, borrowing is not an independent activity of the NHAI. It is a part of the government’s borrowing activity. I don’t see any reason to be unduly perturbed.

But, at the end of the day, NHAI has to repay them.

NHAI is very much a part of the ministry which is very much part of the government. I have greater difficulty in accepting any distinction between NHAI, ministry and the government. NHAI borrows because the government does not want to borrow on its own; it passes on to the ministry and NHAI to borrow off-budget. The government has certain limitations concerning the Fiscal Responsibility Act and therefore, off-budget borrowing is a part of the overall financing of government resources. And this (borrowing) can be done only through agancies like NHAI and Railways, etc. So, borrowing is very much an intrinsic part of the plan. Monetisation is also a part of the plan.

Given the current financial condition, don’t you think that NHAI should award more projects through the BOT mode?

Whether projects to be awarded on BOT or HAM or EPC is determined through a proper financial analysis. There is a well-laid out principle for that. If the project has the potential of being revenue-accretive or where it requires VGF to the extent of 10%, that project would be identified for BOT (toll). Similarly, in projects where the VGF requirement is between 10% and 20%, we consider them for HAM and projects where VGF is required in excess of 20%, we award them on EPC.

Broadly the decision of mode of delivery is determined on the basis of financial analysis of each project. I think that should not be tinkered with; otherwise, we would be making a mistake. Having said that, in the last few months, very few projects came out of the BOT mode and I am sure that with the large number of projects that are being rolled out, a large number of projects would come out in the BOT mode. I think BOT (toll) now should be brought back into the model. Let us not mix up the financial stretch up of NHAI with the mode of delivery.

What steps should the government take to attract investors for the BOT projects?

It’s a function of overall economic environment. Let us assume that there are one lakh users in a particular stretch now. If the health of the economy is 30% better, the number of users in that stretch will also go up to 1.3–1.4 lakh. The toll revenue will also go up to that extent. So, whether a project is viable under BOT (toll) or not depends upon the economic conditions prevailing around that project. So, in certain corridors where the intensity of traffic is high, we should go for BOT (toll); but where there is lack of intensity in places like North-East or in difficult or backward areas, you can’t expect BOT (toll). Globally also, BOT toll has not been tried as a panacea for all projects, it is done only in major corridors.

Cost of development of highways has gone up which but recovery from ToT can’t match. This is not at all correct. NHAI has sold one tranche (under TOT) and in that there was 50% upside. There are private players who have sold their projects at 40% profit. Land prices have shot up because Parliament had decided to pay a huge amount of premium. Land price on transport infrastructure should not be a part of the project cost.

Given the current economic slowdown, don’t you think the government should walk slower on ToT?

No, not at all. ToT is not linked to domestic buyers, but international ones. And there is a huge amount of money available internationally. I don’t see any reason why the government can’t sell highways under ToT.