With budgetary support for roads increased by just 5.5%, it will be a challenge to get private funds
Though the government has set ambitious plans for the road sector, the fund allocation proposal in the Budget has been a complete dampener despite the government recommending a Re 1 per litre Central Road and Infrastructure cess on petrol and diesel.
As a result, the shortfall in infrastructure funding will have to be met from Internal and External Budgetary Resources (IEBR), thereby raising debt level for government agencies.
In her Budget speech, finance minister Nirmala Sitharaman announced that “The government will carry out a comprehensive restructuring of National Highway Programme to ensure that the National Highway Grid of desirable length and capacity is created using financeable model. After completing the Phase 1 of Bharatmala, in the second Phase, states will be helped to develop State road networks.”
On the fund allocation, Rajeshwar Burla, assistant vice president, (associate head-corporate ratings), ICRA Ltd, said, “The budgetary allocation towards capital spend for Ministry of Road transportation and Highways (MoRTH) for FY2020 stood at Rs 72,044 crore, around 21% lower than what is required. A part of this shortfall is plugged by way of higher IEBR (including market borrowings and asset monetisation) for National Highways Authority of India (NHAI) at Rs 75,000 crore for FY2020 as against Rs 62,000 crore in revised estimates for FY2019.”
Already, NHAI is in the process of raising funds by monetising road assets through Toll-Operate-Transfer and Infrastructure Investment Trust routes.
“Therefore, timely monetisation of mature road assets is critical to fetch funding to support ambitious execution targets set for the Bharatmala programme,” said Burla.
However, with the budgetary support towards roads and highway increased by just 5.5% over FY19, it will be a challenge to get in private investments, especially when liquidity crisis is still hampering all the sectors.
On the other hand, though the figure of Rs 100 lakh crore looks promising to upgrade the country’s infrastructure in the next five years, the need of active private participation will be a key to success.
Vikash Kumar Sharda, partner of Infranomics Consulting LLP, raised the question over the availability of funds. “Where will this money come from? As on March 31, 2019, bank credit to infrastructure was a mere Rs 10.55 lakh crore. Assuming that 50% of the above plan comes from the government budget, balance 50% would need to be brought in by the private sector.
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