How India is monetising its road assets
ROADS & HIGHWAYS

How India is monetising its road assets

Monetisation of assets is key to the survival of operators while also empowering bodies like MoRTH and NHAI with the requisite funds required to keep building infrastructure projects.

As we scale up the pace of infrastructure building in India, one of the primary concerns is also unlocking the investment value of these assets to generate long-term patient capital that can be used for further public good, mainly in infrastructure projects.

In any road project,80-85 per cent of NHAI’s expenditure goes into construction and land acquisition, hence monetisation of assets remains an important aspect. Moreover, the National Monetisation Pipeline (NMP) has mandated thatRs 1.6 lakh crore of monetisation should come from the roads and highways sector out of a total of Rs 6 lakh crore. “To achieve this target, different approaches ranging from InvITs and TOTto HAM,have been utilised,” says Anand Kulkarni, Director, CRISIL. “In the current scenario,InvITs have played out well for NHAI. Though TOT models have also been utilised to raise funds, the response has been a mixed bag – 50 per cent of the projects have been awarded under TOT however half these projects have been cancelled. Hence, it is safe to say that the InvIT model will continue to play a key role in monetisation of assets.However, challenges remain.”

Market gurus point out that though NHAI is announcing and awarding projects,in many casesit is unable to complete the land acquisition in time. Keeping this in mind in the initial bidding itself, extra costs are considered.However,as the inflationary period begins,NHAI is compensating it by way of the wholesale price index (WPI) but the real inflation is much higher. This,in turn, is creating a cost pressure.

To read the full article, CLICK HERE...

Monetisation of assets is key to the survival of operators while also empowering bodies like MoRTH and NHAI with the requisite funds required to keep building infrastructure projects. As we scale up the pace of infrastructure building in India, one of the primary concerns is also unlocking the investment value of these assets to generate long-term patient capital that can be used for further public good, mainly in infrastructure projects. In any road project,80-85 per cent of NHAI’s expenditure goes into construction and land acquisition, hence monetisation of assets remains an important aspect. Moreover, the National Monetisation Pipeline (NMP) has mandated thatRs 1.6 lakh crore of monetisation should come from the roads and highways sector out of a total of Rs 6 lakh crore. “To achieve this target, different approaches ranging from InvITs and TOTto HAM,have been utilised,” says Anand Kulkarni, Director, CRISIL. “In the current scenario,InvITs have played out well for NHAI. Though TOT models have also been utilised to raise funds, the response has been a mixed bag – 50 per cent of the projects have been awarded under TOT however half these projects have been cancelled. Hence, it is safe to say that the InvIT model will continue to play a key role in monetisation of assets.However, challenges remain.” Market gurus point out that though NHAI is announcing and awarding projects,in many casesit is unable to complete the land acquisition in time. Keeping this in mind in the initial bidding itself, extra costs are considered.However,as the inflationary period begins,NHAI is compensating it by way of the wholesale price index (WPI) but the real inflation is much higher. This,in turn, is creating a cost pressure. To read the full article, CLICK HERE...

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