Gadkari set up Infra Financial Corp to fund HAM road projects

Nitin Gadkari

Union Minister Nitin Gadkari on Monday said Finance Ministry's nod will be sought for setting up an Infrastructure Financial Corporation for lending to road projects awarded through the Hybrid Annuity Model (HAM) in view of cautiousness of national banks in funding them.

A committee will also be set up to resolve the matter and find a way out on how banks can be friendly for infrastructure projects particularly when the sector is moving fast, the Transport and Infrastructure Minister said during the Question Hour in the Upper House. That apart, the government is trying to get funding from multilateral agencies like World Bank for these projects, he said, adding that this would require permission from the finance ministry.

The government started awarding road projects as per the HAM after it failed to get a response from the public-private partnership (PPP).

To date, 123 HAM projects have been approved involving a cost of Rs 1.40 lakh crore, while banks have extended support of Rs 47,000 crore, he added.

"There are some problems. I always say there are some people who convert problems into opportunities, there are some who convert opportunities into problems. The problems are there, you are absolutely correct. We will take care of them and resolve them," Gadkari said.

Private banks are funding these projects but not the nationalized banks, he said, taking serious note of a suggestion made by an MP on setting up of a separate infrastructure financial arm of National Highways Authority of India (NHAI) to assist road projects. "Your suggestion is absolutely correct. Power Corporation has an economic arm called Power Finance Corporation and Railway Corporation has Railways Finance Corporation.

Now this is the sector which is contributing 2.5 percent to the GDP, it is economically viable but banks are not cooperating," he said. Out of 123 HAM projects awarded, some 121 projects were sanctioned. But the majority of projects are funded by private banks.

Even NBCC is financing, he added. "The suggestion of making a financial arm to NHAI is absolutely correct. We will take it to the finance ministry and will try my level best to get the approval for that," Gadkari said in the Upper House.

The Minister said that the infrastructure sector is moving fast and the current construction rate is 32 km per day. The government aims to award road project contracts worth Rs 15 lakh crore during the current term, higher than Rs 11 lakh crore giving during the last five years.

To a query on steps taken to expedite stalled projects, Gadkari said, "Today, we have taken a decision to allow scheduled banks to give bank guarantee for these projects." He also said, "We will appoint a committee under the chairmanship of our secretary. We will discuss the issue with the chairman of banks and resolve the issue and find out a way as to how banks can be friendly for infra projects particularly when the sector is moving fast. We will try our level best."

Out of 123 HAM projects awarded so far, 101 projects have achieved financial closure, he said and added the response from private banks is good.

"We are expecting more support from our nationalized banks." The problem is that 16 projects are yet to be sanctioned as they have been allotted after January 31, 2019, for which initial time period of 150 days has not expired, he added. He said that the government was trying to get funding from multilateral agencies for these projects.

"We are trying for that. One of the infrastructural funds raised by the finance ministry now principally accepted to give Rs 40,000 crore from banks," But the NHAI has a triple rating and a strong economic base and can get the foreign finance.

Since the NHAI is a government-owned authority, permission needs to be sought from the finance ministry, he said. To a query on delay in implementing HAM projects, the Minister cited the election code of conduct. "That's also an important thing. It is time for the country to think about it. These three months, our bureaucracy takes it as Diwali mahotsav, nobody wants to take the decision," he said.

On delay in road projects in Kerala, the Minister while responding to another query, said the land acquisition is a "big problem" in the state. "In an Rs 1000-crore project, the cost of construction is Rs 300 crore and land acquisition is Rs 700 crore," he said and added that the state government has been asked to share the cost on 50:50 basis.

The Kerala government has been suggested to exempt Goods and Services Tax (GST) on steel and cement used in road projects and give that tax as equity for land acquisition which can reduce 15 percent cost, he said.

"I have discussed with the chief minister. He has promised when he will visit Delhi along with his finance minister. I am going to resolve the issue," Gadkari said.

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