Niif vs nhai why alphabet soup sours

Niif vs nhai why alphabet soup sours

It seems strange but true. One arm of the government is refusing to fund another.

The National Investment and Infrastructure Fund (NIIF) is reportedly reluctant to part-fund the Delhi-Mumbai expressway project of the National Highways Authority of India (NHAI).

But, then, the highway agency’s fast-rising debt burden is a matter of concern. It has massive sums stuck in pending arbitration cases and its projects have witnessed huge time and cost overruns, even as projected traffic volumes are on shaky grounds these days.

So, it is quite understandable that NIIF, India first-ever sovereign wealth fund focused on infrastructure projects, is chary of providing equity funding for NHAI’s flagship Delhi-Mumbai project.

NHAI must reduce its debt level of nearly Rs 2,50,000 crore by leveraging land value along its ‘right of way’ bypasses and highways, for commercially sound built spaces. Infrastructure is no doubt a promising growth sector, and NHAI bonds remain AAA-rated, but the autonomous agency clearly has an avoidably high debt overhang.

Notice that its high-cost market borrowings are almost twice its annual budgetary support, even as its toll collections now grow in the low single digits.

Hence the pressing need to garner long-term funds from pension funds and insurance companies, by streamlining project execution.

The way ahead for NHAI is to garner statutory project approvals and clearances and carry out attendant land acquisition in a time-bound manner to proactively avoid project delays.

The agency needs to better frame contractual obligations with its project partners with the express purpose of avoiding longdrawn litigation.

The bottomline is the need for financial and managerial savvy at NHAI, for which there seem roadblocks in the way the NHAI board is constituted.