National Highways Authority of India gets nod to monetise projects

Source: Business Standard, Aug 04, 2016

New Delhi: The government on Wednesday opened up brownfield investments in the highway sector to institutional investors. The Cabinet has allowed the National Highways Authority of India (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, under a toll operate transfer model.

The monetisation will be subject to approval of the Ministry of Road Transport and Highways or NHAI on a case-to-case basis, an official statement said.

Around 75 operational highway projects completed under public funding have been identified for potential monetisation using the toll operate transfer model.

The government is of the view that monetisation of public-funded national highways could create a framework for attracting long-term institutional investment on the strength of future toll receivables. Market feedback indicates that certain institutional investors from outside the country have a long-term investment appetite and are keen to participate in operational highway projects with stable toll revenue outlook.

The proposal also means operation and maintenance (O&M) framework requiring reduced involvement of NHAI in projects after construction and completion.

The corpus generated from the proceeds could be utilised by the government to meet its fund requirements regarding future development and O&M of highways. It would also create new business opportunities for a new vertical of developers who specialise in O&M of highways, institutional investors including pension and insurance funds, and sovereign funds which are otherwise averse to taking construction risks but are adequately equipped for making long-term investments in road infrastructure.

The proposal is also aimed at ensuring better O&M of public-funded highway stretches resulting in enhanced quality of service for highway users. At present, the selected concessionaire for operate, maintain and transfer contracts, which are completed and operational, is required to take care of the project for a period of around six to nine years.

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