Mumbai: Soaring debt which has jumped eight times in the past five years, and a steep rise in land prices may force the state-run National Highways Authority (NHAI) to focus on execution of ongoing projects instead of awarding new roads, a report has said.
Rating agency Crisil expects the awarding of all hybrid annuity model (HAM), EPC and build-operate-transfer (BOT) road projects to moderate to 12,000-13,000 km over fiscals 2020 to 2022 compared with 14,000 km over fiscals 2017 to 2019.
It may be noted that in September this year, the Prime Minister’s Office (PMO) wrote a letter to the NHAI outlining suggestions for reorganizing its portfolio, check on the commercial viability of projects and monetise assets.
According to reports, NHAI’s debt has risen eight times from fiscal 2014 to Rs 1.8 lakh crore in fiscal 2019, primarily because of spiralling costs of land acquisition in the roads sector. Generally, land costs make up 30-35 per cent of the total spends.
Crisil also expects the pace of execution to plateau, leading to the construction of 10,500-11,500 km between fiscals 2020 and 2022, compared with an executed 9,000 km between fiscals 2017 and 2019.
However, Crisil said that it expects HAM projects to account for almost half of the NHAI’s executed road projects over fiscals 2020 to 2022.
“If HAM projects that are awaiting appointed dates for over 1.5 years get terminated, the execution outlook for fiscals 2020 to 2022 faces a downside risk of 5-10 per cent. Accordingly, the share of HAM projects would fall to 40-45 per cent in the NHAI’s execution pie for the period,” the Crisil report said.
The agency further said the risk to HAM projects on account of delays in the appointed date is also rising. According to Crisil, only 60-65 per cent of the awarded HAM projects during fiscals 2016 to 2019 have received appointed dates so far. In other words, over 2,540 km of the 6,670 km of awarded HAM projects are awaiting appointed dates.
Agencies
