If the government has to get funding for road projects, it has to look for options beyond PSBs

The construction of roads and highways at a fast pace during ten-years of UPA is well documented. As for the NDA’s performance in the area, Nitin Gadkari as minister in-charge of roads and highways is rated very high in the Narendra Modi government. He has a reputation to maintain. As public works department minister in the Shiv Sena-BJP government in Maharashtra, he was singularly responsible for construction of roads and flyovers in the state. At the centre, the Bharat Mala project to bring remote border areas within the road network has been his brainchild. After the Vajpayee government’s Golden Quadrilateral highway network, Bharat Mala is regarded as strategic for troop movements.

A multi-modal transport policy through integration of air, water and road connectivity has been unveiled during Gadkari’s tenure. But it might fall short of target by completing 3,800 km as against the targeted 4,300 km of road network this fiscal. It might not be entirely to blame for this. Several incomplete roads projects of the UPA era have spilled over. One reason for stress built up in the sector was over-leveraging of balance sheets by roads developers. Non-availability of liquid funds restrained companies from forking out their share of equity funds for projects under hybrid annuity model. Secondly, having burnt their fingers earlier, several banks seem to have been edgy in taking exposure in special purpose vehicles (SPVs) floated for even large high-profile road projects.

A build-up of Rs 10.8 lakh crore non-performing assets by banks has had its impact on several sectors including roads, real estate and long gestation power projects. However, a big chunk of front loaded government expenditure has gone into road projects. For viable projects, international funding should be tapped. Thirdly, multi-lateral funding agencies like the World Bank would happily back roads projects in India. External Commercial Borrowings (ECBs) by top Indian and foreign corporate groups for annuity and BOT projects at reasonable coupon rate should not pose too much of a difficulty. While the government cleans up balance sheets of state-run banks, road developers will have to look for other options. Even bilateral funding could be an option, if funds are the real constraint.