Last month, Finance Minister Nirmala Sitharaman unveiled the Center’s Rs 6 lakh crore asset monetization pipeline, under which 27%, or Rs 1,60,200 crore of monetization assets are slated for roads. The government aims to generate this amount by monetizing 26,700 km of national four-lane highways and above via toll-operate-transfer (TOT) roads and the infrastructure investment fund (InvIT) at Rs 6 crore per km.
CRISIL analysis of the ToT model shows that 65% of the set of samples analyzed (in km) recorded an average to high toll collection growth of> 15% since operation.
According to CRISIL, the key factors important to the success of the route monetization pipeline are; the attractiveness of the projects from the point of view of the potential for future income generation, the operational experience of the players and the operational experience of the players.
The report states that NHAI has accelerated its pace of national highway construction, from 2,623 km in fiscal year 2017 to 4,175 km in fiscal year 2021. However, it is quick to point out that most Project work was performed on EPC (Engineering, Procurement and Construction) and HAM (Hybrid Annuity Model). This resulted in a heavier burden on NHAI’s balance sheet. Its debt ratio tripled to reach 1.5 times in fiscal year 21, notes CRISIL.
Also, it is important to note that with the many Bharatmala and high value highway projects lined up, NHAI’s fund requirements will double to 10 lakh crore in the next five years compared to the previous 5 years. “If these funding requirements are met, we estimate that the NHAI could build approximately 25,000 km of national highways in fiscal year 2022-2026P, compared to 17,228 km in fiscal year 2017-2021,” says the research note.
Roads form the largest part of the plan, the second being the railways at Rs 1.52,496 crore. The asset monetization plan has a four-year timeline, including the current fiscal year 2021-2022.