The Finance Ministry has asked the National Highways Authority of India (NHAI) to put on hold its plan to come with its infrastructure investment trust (InvIT) till its toll-operate-transfer (TOT) model of building roads is entirely stabilised.
Sources in the know told Moneycontrol that the Finance Ministry asked NHAI to wait for some more response to the TOT model before proceeding with InvIT issuance.
“We had approached Finance Ministry to have our InvIT but the proposal has been deferred," an official told Moneycontrol. "They said that let one more project under TOT get underway. After looking at the responses and valuation on projects (by bidders), we will float our InvIT."
The NHAI successfully closed the country’s first TOT bidding in March, receiving Rs 9,681.5 crore. The bid was won by a joint venture between Sydney-based Macquarie group and Ashoka Buildcon to manage 648 km of National Highways spread across Gujarat and Andhra Pradesh.
Under TOT, operational assets such as highways are given to a concessionaire for a specified period -- 30 years in the case of Macquarie-Ashoka JV -- to be operated and managed by them. The concessionaire has to pay an upfront lump sum amount under the contract.
The NHAI is expected to bring second and third TOT tranche by the end of June.
InvITs are trust units that hold infrastructure assets, and through which money is pooled by parties and given to the trust. The trustee can use money raised through the InvIT to finance infrastructure activities.
Cash flows from the assets held under the InvIT help investors earn a return on their investment. The NHAI's InvIT is expected to be used to fund the Centre's ambitious Bharatmala programme.
Bharatmala is vowed to be the country’s biggest highway development programme. It envisions constructing over 60,000 kilometres of national highways with a capital investment of Rs 6.92 lakh crore.
Under the first phase, spread over the next five years, a total of 34,800 km highways are to constructed or expanded with Rs 5.35 lakh crore. It entails construction of economic corridors (9,000 km), inter-corridors and feeder roads (6,000 km) border and international connectivity roads (2,000 km) among others.
The official of NHAI said that its InvIT’s structure is under discussion where NHAI will be the sponsor. The assets of NHAI will be put in the trust. The decision on whether it will be a public or private placement for final investors is yet to be decided.
Notably, a finance ministry official told Moneycontrol that NHAI “may not need forming its own InvIT. It could use existing ones”.
Union Finance Minister Arun Jaitley had announced in his Budget speech this year that “to raise equity from the market for its mature road assets, NHAI will consider organising its road assets into special purpose vehicles and use innovative monetizing structures like TOT and InvITs”.