Despite the apparent thrust being given to infrastructure spending, the finance ministry has rejected the road transport and highway ministry’s demand for hiking the budget outlay for it by Rs. 43,000 crore or 51% over the budget estimate.
In the Budget for 2019-20, the ministry of road transport and highways (MoRTH) was allocated Rs. 83,016 crore for highway construction, up from Rs. 78,626 crore in 2018-19 and Rs. 61,015 crore in 2017-18. Of the total budgetary support for the current fiscal, MoRTH has already spent Rs. 51,798 crore or 62% by September end, as per the Controller General of Accounts data.
Apart from the Budget outlay, the extra-budgetary funds, including domestic and overseas borrowings and some receipts by NHAI, are being used by the government. The extra-budget resources to be raised this year is around Rs. 75,000 crore.
In its latest rating action, Moody’s retained NHAI’s rating at ‘Baa2’, but cut the outlook from stable to negative (on a par with the sovereign rating for India).
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MoRTH had asked for a big hike in budget outlay as it apprehends that given the dearth of private investments, it requires more government funds to accelerate the pace of highway construction. The construction pace fell from 29.2 km a day in FY19 to 24.6 km a day in the first half of this fiscal.
The ministry’s target for FY20 is 40 km per day, which translates to stretches of 14,600-km length during the whole financial year.
The finance ministry wants to keep up the momentum of infrastructure spending and so it is committed to release the entire budgetary outlay for MoRTH. However, given that a huge tax revenue shortfall and a decline in nominal GDP growth have added to its fiscal pressures, it has little headroom to enhance the outlay for even MoRTH.
Project awards during the April-September period this year were just for 2,103 km. Though this was still higher than projects of 1,698 km awarded in the first half of last fiscal, the H1FY19 performance looked unimpressive compared with awards of 4,482 km in the first half of FY15, a period that immediately followed assumption of office by the first Narendra Modi government.
MoRTH needs additional funds to award and construct more highway projects via the EPC mode, in which the executing agency has to bear all expenses. NHAI has failed to award a single project through either the hybrid annuity model (HAM) or the build-operate-transfer (BOT) route so far in the current fiscal. HAM allows private investors to have very little skin in the game — sub-10% practically — this has been the sole channel for private investments in the sector in the FY17-FY19 period, after the stress in the sector led to virtual cessation of the BOT-Toll model, where the developer collects tolls to recoup investments and therefore bears real business risk.
Source: Financial Express