Revenue Roadmap: India Sets Sights On Monetising $24 Billion Worth Of Highways By 2027

The Indian government is aiming to generate roughly two trillion rupees, equivalent to $24.1 billion, by capitalising on highways in the upcoming years, according to rating agency CareEdge.

At 63.31 lakh km, India — the seventh largest country — has the second-largest road network in the world. There are currently 599 national highways in India.

The National Highways Authority of India (NHAI) is anticipated to construct around 4,000 to 4,500 kilometres (equivalent to 2,796.2 miles) of new roads annually over the next three years.

The government can derive revenue from these assets through the use of either an Infrastructure Investment Trust (InvIT) or a toll-operate-transfer (TOT) model.

The current government strategy, based on a public-private partnership (PPP) model, has proven successful, with 88 per cent of road projects awarded before March 2020 now operational and ripe for monetisation.

Only 12 per cent of projects awarded prior to 2020 have experienced delays, primarily attributed to the shortcomings of their operators, as reported by the rating agency. Among the delayed projects, a significant 75 per cent are associated with weak sponsors.

Maulesh Desai, director at CareEdge Ratings, stated, "Strong sponsors are expected to benefit from healthy balance sheet indicators, granting them financial flexibility. In contrast, moderate sponsors with a substantial under-construction portfolio and stricter sanction terms face increased financing risks," reports the Economic Times.

In November 2021, the NHAI launched the InvIT and successfully raised nearly 102 billion rupees by December 2022. There are reports that the Indian government intends to raise an additional 100 billion rupees through another round of InvITs before the fiscal year's end.

An InvIT is similar to a mutual fund in that it allows for the direct investment of modest sums of money from potential individual/institutional investors in infrastructure in exchange for a tiny share of the income as a return.