BUDGET 2018: Roads see 20% Jump in Allocation

FM Arun Jaitley said the government is confident of completing construction of highways of over 9000 km this year.

Finance Minister (FM) Arun Jaitley, in his Budget speech on Thursday raised the allocation towards the construction of roads and highways from budgetary and extra-budgetary resources to Rs 5.97 lakh crore from an earlier estimate of Rs 4.94 lakh crore for the fiscal year 2017-18.

Industry players welcomed the move. Satish Parakh, MD & CEO of Ashoka Buildcon, said, "This jump of 20% in expenditure on roads will give road infrastructure companies a renewed boost in business opportunities. This will also create a lot of opportunity for job creation. Other tax benefits like 25% tax for businesses having turnover of less than Rs 250 crore will help our subcontractors and they can be more competitive." Read more:

Jaitley said the government is confident of completing the construction of national highways exceeding 9000 km this year. He added, "The ambitious Bharatmala project has been approved for providing seamless connectivity of interiors, backward areas and borders of the country, to develop 35,000 km in the first phase at an estimated cost of Rs 5.3 lakh crore."

Manish Agarwal, partner and infrastructure leader, PwC India, said the increased allocation for the roads sector is a welcome move as infrastructure creation is a necessity. He said, "This has not been done at the expense of straining the fiscal deficit. Had it come at the expense of fiscal discipline, I would have been worried because that is what impacts the sovereign ratings and this, in turn, makes overseas investors cautious. But the roads programme is going very well and many road developers will be bidding for the upcoming projects for sure."

The FM also said the National Highways Authority of India (NHAI) would look to raise funds from the market against its mature road assets. He said NHAI would consider launching the newly introduced infrastructure investment trusts (InvIT) as well as mop up capital from the toll, operate, transfer (TOT) model. The first bundle nine road projects under the TOT model is at the bidding stage at present with a host of overseas and Indian investors showing interest. Funds such as Brookfield, PSP Investments and Macquarie have attended the pre-bid meetings thus far and may lodge bids by the last date for submission of bids, February 9. Jaitley said, "To raise equity from the market from mature road assets, NHAI will consider organising the road assets into a special purpose vehicle and use innovative mobilisation structures like TOT and InvITs."

The industry welcomed the move, saying NHAI would be better-placed to fund the huge outlay on the construction of new roads under the new Bharatmala initiative. Jayant Mhaiskar, VC and MD, MEP Infrastructure, said raising funds under either structure would not be a problem for a triple-A rated organisation like NHAI. He said, "One of the differences is an InvIT goes through all the required stipulations by the market regulator and compliance that needs to be done, which, once done, gives more comfort to incoming investors since the due diligence has already been completed by way of regulatory approvals."

Agarwal of PwC said launching an InvIT would add to NHAI's armoury. He said, "NHAI has been leveraging its cash flows. They've used it for bonds, TOT, and InvIT is also a natural part of that arsenal. An InvIT is attractive to an investor because they are looking to access operational cash flows and in an InvIT structure, there is potential to also add on projects in future. Also, there is a whole range available now for investors, from bond holders to traffic risk takers and InvIT is part of that range."

The FM also said that the system of physical cash payments at toll plazas is being replaced by FASTags and other electronic payment systems to make travel seamless. He informed that the number of FASTags have gone up from 60,000 in December 2016 to over 7 lakh tags at present. All four-wheelers being sold after December now compulsorily have to be factory-fitted with FASTags, providing a fillip to the move to cashless systems. Jaitley said the government is working to come up with a system that will deduct toll payment on a pay-as-you-use basis in future.

At present, digital payments are essentially made via radio-frequency identification (RFID) stickers, which are linked to bank accounts, under NHAI's electronic toll-collection programme, called FASTag. Under this system, the issuer bank issues the FASTag to their customer (a vehicle owner) and links his account for the deduction of toll fare. An “acquirer” bank, which ties up with the toll operator for managing the payments at the toll plaza, facilitates the toll transactions and settles payments to the toll booth operator. The clearing house, set up by the National Payments Corporation of India (NPCI), then facilitates the transaction and settlement between the issuer and the acquirer banks. The concessionaire, or toll booth operator, provides the infrastructure for acceptance of the RID-enabled tag in the ETC lane. According to the latest data from NPCI, the FASTag programme is currently operational on 384 toll booths on national highways and seven toll booths on state highways. As on November 30, 2017, banks had issued a total of 7.68 lakh tags.

Earlier this month, in an attempt to speed up traffic flow through toll booths, the government notified all manufacturers and dealers to equip new cars rolled out on or after December 1 with FASTags. According to the notification, FASTags will be fixed on the front windscreens of all new four-wheelers. This should further fuel growth in digital toll payments. Existing vehicle owners have, however, not been asked to install these FASTags for now.

- TradeBriefs Bureau -