Indian government expected to monetize Rs. 2tn worth of highways
The Indian government is expected to monetize around Rs. 2 trillion ($24 billion) worth of highways in the coming years, as reported by CareEdge Ratings. The National Highways Authority of India (NHAI) is set to build 4,000 to 4,500 kilometers of new roads each year for the next three years. These assets can be monetized through an Infrastructure Investment Trust (InvIT) or toll-operate-transfer model.
Challenges faced by highway projects
So far, the public-private partnership (PPP) model has been successful, with 88% of road projects awarded before March 2020 now up and running, ready for monetization. However, there are still some challenges with the PPP model. One-third of projects awarded after March 2020 have faced delays due to slow approvals and project complexities caused by the pandemic. Moreover, 12% of projects awarded before March 2020 are still delayed because of weaknesses in their operators.
NHAI's InvIT initiative
In November 2021, the NHAI launched an InvIT and raised nearly Rs. 102 billion by December 2022. The Centre aims to raise an additional Rs. 100 billion through another tranche of InvITs before the end of the fiscal year, according to media reports.
What are InvITs?
An InvIT is a financial instrument that operates as a Collective Investment Scheme, resembling a mutual fund. It facilitates direct investments from both individual and institutional investors into infrastructure projects. In return, investors receive a portion of the income generated by these projects as a return on their investment.
Significance of highway monetization
Monetizing highways is essential for India's economic growth and infrastructure development. It will not only generate revenue for the government but also help attract private investment in the sector. The successful implementation of this monetization plan will enhance the country's transportation network, improve connectivity, and create new job opportunities. As India continues to recover from the pandemic, the monetization of highways will play a significant role in driving economic progress and upgrading the nation's infrastructure.
