India aiming to monetize $24 billion worth of highways by 2027

On Thursday, CareEdge Ratings said the government can monetize 4,000 to 4,500 kilometers (2,796.2 miles) of new roads commissioned yearly by the National Highways Authority of India over the next three years under an Infrastructure Investment Trust or toll-operate-transfer model.

Sep 29, 2023 - 19:46 Updated: Sep 30, 2023 - 12:27

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India aiming to monetize $24 billion worth of highways by 2027

Vehicles travel along a highway in an aerial photograph taken in Delhi, India, on Friday, Sept. 4, 2020. Indias oil-product demand is set to slump to a five-year low this financial year, with a bleak outlook for diesel consumption as the nations truck operators idle vehicles and consider cutting the size of their fleets.

According to the findings of a rating agency, the Indian government is anticipated to monetize motorways with a value of close to two trillion rupees ($24.1 billion) over the course of the next several years.

According to a note published by CareEdge Ratings on Thursday, the National Highways Authority of India is expected to commission between 4,000 and 4,500 kilometers (2,796.2 miles) of brand new roads each year over the course of the next three years. The Indian government has the ability to monetize these assets by utilizing either an Infrastructure Investment Trust or a toll-operate-transfer model.

Because 88 percent of the road projects that were awarded before to March 2020 are now operational and can be monetized, the present plan that the government is implementing, which is based on a model of public-private partnership, has been effective. According to the rating agency, just 12% of projects that were granted in the pre-2020 timeframe are behind schedule because of the shortcomings of their operators.

The aftermath of the pandemic is still having an effect, as one-third of the projects that were granted using a public-private hybrid model after March 2020 are suffering delays due to delayed approvals and the complexity of the projects.

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"Moderate sponsors who have a substantial under-construction portfolio and stricter sanction terms face amplified financing risks," said Maulesh Desai, director at CareEdge Ratings. "While strong sponsors are expected to benefit from healthy balance sheet indicators, providing them with financial flexibility, moderate sponsors with a substantial under-construction portfolio face increased risks."

The NHAI initially distributed an InvIT back in November 2021, and as of December 2022, it had collected close to 102 billion rupees. According to reports from the local media, the government of India is planning to issue another tranche of InvITs in order to generate an additional one hundred billion rupees before the end of the financial year.