Why does the government want NHAI to reduce debt?

Since 2014-15, highway developer debt has grown 14 times 24,188 Cr to 3.44 trillion at the end of January. The government aims to reduce 1 trillion by 2024-25.

“High debt with NHAI is a concern, but there is no issue on the solvency of the highway developer,” Union Transport Secretary Giridhar Armane said. “The loan is taken only on bankable projects with regular revenue flow; hence, the credit servicing is comfortable. Nevertheless, the institution moratorium on additional borrowing in FY 2013 by meeting a major part of the capital expenditure through higher budgetary support. Will impose,” Armane said in an interview.

Limiting borrowing will not affect NHAI’s ability to take up projects envisaged in the FY23 budget as the allocation for the authority has been more than doubled. 65,060 crore in FY22 (Revised Estimates) to 1.34 trillion in FY23, he said.

NHAI borrowed . Close 65,000 crore each in FY22 and FY21, and if the same level of borrowing continued in FY23, its total debt would have crossed 4 trillion. “While the overall debt level of NHAI may not fall significantly in FY13 with more or less borrowing, the authority will bring its debt servicing cost down to a close. 6,000-7,000 crore by paying off old loans and swapping a portion of the high-cost loans with low-interest loans,” Aramane said.

NHAI is estimated to pay approx. 30,000 crore in interest cost in FY23. plan to prepay and switch 46,000 crore loan next year, reducing debt repayment burden. Besides, the authority is expecting a spurt in toll collection from Build-Operate-Transfer (BOT) projects which will generate 33,000 crore revenue in FY 2012, increased 37-38,000 crore in FY23. revenue is expected to increase 50,000 crore in three years after the completion of Bharat Mala projects. NHAI has now started monetizing assets with Toll-Operate-Transfer (TOT) model. It has also issued its first InvIT this year. NHAI raised the issue 24,000 crore from these sources.

“At the current rate of traffic growth, toll revenue stream of NHAI may touch 72,000 crore by 2032-33. Hence, there is no question on the solvency of NHAI. With various measures to monetize the property, the developer will have enough room to return the earnings to the projects without disrupting the highway development programme.”

“We are looking at asset monetization and alternative sources of financing to get rid of traditional debt,” he said.

According to analysts, one of the reasons for NHAI’s rise in debt is the lack of investor interest in BOT projects, prompting it to award projects under the engineering, procurement construction model and the now popular hybrid annuity model. In both, NHAI requires contractors to pay the cost incurred by them at regular intervals. With the government increasing the highway development programme, NHAI will need more funds to reward the projects.