Sources indicated that the next bidding process would not involve any changes in the model even as DPR for 1,700 km of highways are being studied to finalise the tranches
The National Highways Authority of India (NHAI) has ruled out any tweaks in the bidding conditions for the next bundle of highways under the Toll-Operate-Transfer (TOT) model expected to be out by the end of March.
Sources indicated that the next bidding process would not involve any changes in the model as was expected after the first bundle came out for auction.
“Next bundles won’t have any changes in the conditions laid out by NHAI… Whatever changes had to be made were incorporated during the first auctioning process,” sources cited above said.
Deepak Kumar, chairman, NHAI had told a national daily that next bundles could either see a smaller concession period (down from present 30 years) or the amount to be raised would be less than USD 1 billion.
Sources said that alterations demanded by auction-goers was for eligibility criteria including changes in certain terms and conditions related to escrow agreement between NHAI and the winning party along with tweaking conditions pertaining to consortium formation.
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“Changes related to consortium-partner agreement were made to include more domestic bidders in the process,” Moneycontrol was told.
Highway monetisation scheme or TOT is a process under which state-run NHAI was authorised to receive upfront money from an individual, private entity or a combination of them against handover of select stretches of highways. The highest bidder would be responsible for operating and maintaining the highways for three decades.
Cabinet committee on economic affairs had approved TOT in 2016, authorising NHAI to monetise 75 public-funded national highways with approximate road length of around 4,500 km. The move would help NHAI fetch around Rs 1 lakh crore. This model was devised to provide financial assistance to NHAI to raise upfront money to fund road projects.
Rohit Singh, member finance, NHAI told Moneycontrol that second, third and fourth tranches for TOT bidding are almost ready, targeted to raise USD one billion each. The second tranche is expected to come by end of March.
NHAI had, in February, successfully auctioned 680.64 km of highways raking Rs 9,681.5 crore. The nine highways included in the first tranche belonged to Gujarat and Andhra Pradesh. Macquarie-Ashoka Buildcon emerged as the highest bidder after bidding approximately 1.5 times the base price of Rs 6,258 crore.
Experts are now seeing asset monetisation as a successful method of raising funds after the maiden highway bundle was oversubscribed by bidders.
“TOT is now being looked at as a successful asset monetisation model and there is significant interest both in the government and the private sector (towards it),” said Jagannarayan Padmanabhan, director and partner-leader, transport and logistics, CRISIL Infrastructure Advisory.
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“The bidding for TOT bundle-1 was aggressive, with all bidders quoting higher than NHAI’s estimates. There was a substantial difference (close to 30 percent) between the winning bidder and next highest bidder”.
CRISIL expects NHAI to raise approximately Rs 60,000 to Rs 70,000 crore from the asset monetisation scheme.
“NHAI has already appointed technical consultants for Bundles 2, 3 and 4 and financial consultants are soon to be appointed. The overall CRISIL estimate was Rs 60,000 to 70,000 crore for the entire programme.
Sources said that detailed project report (DPR) for approximately 1,700 kilometer of highways is being evaluated to decided final stretches of highways.
Selected highways for next tranches spread across states like West Bengal, Bihar, Rajasthan, Odisha, Gujarat, Tamil Nadu, Uttar Pradesh and Jharkhand.
Padmanabhan, however, said that NHAI must stay cautious about the future stretches that it selects for bidding as future bids may or may not be as aggressive as the first one.
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“While the first NHAI bundle witnessed aggressive bidding, this may not be the case going forward and would depend on factors such as the tolling history of the stretches, asset condition, states where the stretches are located etc.,” he said.
NHAI has been exploring various options like TOT, issuance of masala bonds, foreign pension funds and equity investors to raise finance to fund numerous projects including Centre’s Bharatmala programme which envisages to build approximately 60,000 km of national highways with capital outlay of Rs 6.92 lakh crore.
The state run body was allotted Rs 91,663.13 crore under union budget of 2018-19, up from Rs 83,170.59 allotted during 2017-18. The overall allocation to road transport and highways ministry saw a jump of 16.39 percent and was fixed at Rs 71,000 crore for FY19.
Infrastructure development, which has been one of the focus areas for Modi government, received an all-time high allocation of Rs 5.97 trillion. Union finance minister, Arun Jaitley, mentioned during the budget presentation that India needs infrastructure investment of Rs 50 trillion.