Budget?s capital spend for road min for FY2021 lower than required for Bharatmala

Budget 2020 emphasises on accelerated development of highways to be undertaken; including 2,500 km access control highways; 9,000 km of economic corridors; 2,000 km of coastal and land port roads; 2,000 km of strategic highways; Delhi-Mumbai Expressway and two other packages to be completed by 2023; and Chennai-Bengaluru Expressway to be started. It has also proposed to monetise at least 12 lots of highway bundles of over 6,000 km before 2024.

Rajeshwar Burla, Vice President & Associate Head, Corporate Ratings, ICRA, shares his views on the Budget 2020 outcome for the roads sector. He says, ?The budgetary allocation towards capital spend for ministry of road transportation and highways for FY2021 stood at Rs 819.74 billion, around 18 per cent lower than what is required to fund the ongoing Bharatmala programme. Even, IEBR (which includes market borrowings and asset monetisation) for NHAI is lower at Rs 650 billion for FY2021 as against Rs 750 billion in RE FY2020. As a result, the total capital outlay is expected to remain flat for FY2021.?

He adds, ?With Bharatmala and allied programmes facing funding challenges; investors expected funding roadmap for the ambitious National Infrastructure Pipeline (which includes Bharatmala) involving outlay of around Rs 19.38 trillion over the next five years. However, no road map was provided in the Budget. Therefore, the successful asset monetisaton through TOT route and the ability of NHAI to raise funds through InvIT would remain critical. In this context, 100 per cent exemption of taxes for Sovereign Wealth Funds is hugely positive for Infrastructure. This would enable NHAI and other developers to lap up funds for proposed InvITs.

Commenting on the PMGSY, he continues, ?Thrust on PMGSY continued through sustained high allocations and launch of third phase of PMGSY to connect villages to rural markets. Under this, 125,000 km of roads is expected to be upgraded over the next five years with a total outlay of Rs 802.50 billion. This will support order-book of small to mid-sized road construction companies over the medium term.?

?Availability of long-term infrastructure financing,? he says, ??continues to remain a challenge given the twin problems faced by commercial banks - asset-liability mismatch and increasing share of stressed assets. While the fund allocation of Rs 220 billion made to IIFCL and NIIF would enable them to leverage and fund infra projects. This can support only a small portion of overall funding requirement.?