The Indian government recently planned to monetize about 2 trillion rupees worth of highways in the coming years.
About the Monetization plan:
- The Indian government is aiming to generate roughly money equivalent to $24.1 billion, by capitalization of highways.
- The National Highways Authority of India (NHAI) could commission 4,000-4,500 kilometers of new roads annually over the next three years.
- NHAI is a statutory body established in 1988 for development, maintenance and management of national highways under Ministry of Road Transport & Highways.
- This can be achieved through Infrastructure Investment Trusts (InvITs) or a toll-operate-transfer model.
- The NHAI raised nearly 102 billion rupees through InvITs by 2022 and aims to raise additional 100 billion rupees through another tranche of InvITs.
- Under the current public-private partnership model, 88% of road projects awarded before 2020 are operational and can be monetized.
- Only 12% of these face delays due to operational weakness, but one-third projects under public-private hybrid model were delayed post- pandemic, owing to approvals and project complexities.
- Strong sponsors would benefit from healthy balance sheet indicators, offering financial flexibility.
- In contrast, moderate sponsors with a substantial under-construction portfolio and stricter sanction terms can face increased financing risks.
About Infrastructure Investment Trusts (InvITs):
- InvITs are like mutual funds, which enable direct investment of small amounts of money from individual/institutional investors in infrastructure to earn a small portion of the income as return.
- They can be treated as the modified version of Real Estate Investment Trusts (REITs) designed to suit specific circumstances of the infrastructure sector.
- InvITs can be established as a trust and registered with Securities and Exchange Board of India (SEBI).
- It was notified SEBI (Infrastructure Investment Trusts) Regulations, 2014, providing for registration and regulation of InvITs in India.
- Components/Elements: Trustee, Sponsor(s), Investment Manager and Project Manager.
[Ref- ET Money]
About Toll-Operate-Transfer (TOT) model:
- Public funded projects are put up for bidding, where the right of collection and appropriation of Toll (fee) is assigned for a predetermined concession period (30 years) to developers or investors.
- They would operate against the upfront payment of a lump sum amount to government.
- After concession period is over, it is transferred back to government.
- In 2016, the Cabinet Committee on Economic Affairs (CCEA) authorized NHAI to monetize public funded national highway projects, and approved this model.
[Ref- Indian Infrastructure]
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