The Union government’s think tank NITI Aayog has ordered an evaluation of the works of NHAI as the highways authority gears up to service its mounting debt that has crossed INR 3 trillion. It is learnt that in the context of its increasing debt servicing burden, contingent liabilities, dependence on government budgetary support and ambitious highway and infrastructure plan, NITI Aayog feels the need for an assessment of the National Highways Authority of India (NHAI).
The study will assess the “financial viability” of an organisation to meet its short and long-term liabilities, raise funds efficiently, existence of diversified streams of revenue, mechanisms in place to mitigate financial risk and having processes and practises in place for planning and forecasting. It will also assess the asset monetization strategy of NHAI with
regards to the percentage of revenue from asset monetization, strategy for building stretches, reasons for successful and unsuccessful bundles and assessment of InvITS.
The Development Monitoring and Evaluation Office (DMEO) of the NITI Aayog, in its report, said NHAI’s spending in FY 2021-22 was met partly by government budgetary allocation which was INR 57,350 crore and borrowings from the market which was to the tune of INR 65,000 crore. DMEO observed that NHAI had to spend INR 31,735 crore or one-fifth of its total spending in FY’2022-23 to service this debt. Based on observations of the DMEO, NITI Aayog plans to conduct an
“institutional evaluation” of NHAI with the focus on its operations, relevance, effectiveness, efficiency and finances, as well as existing policies and decision making processes.
DMEO said, “NHAI’s abilities to continuing servicing its increasing debt burden and meet its stated highway development targets require closer examination.” The office also said that NHAI has contingent liabilities, primarily arising out of disputed claims filed by contractors or developers. Those liabilities are to the tune of INR 71,765 crore, as of March 31,
2020.
The government think tank has said, “There is a need to better understand the performance of NHAI and evaluate its existing practices and finances in order to provide inputs in improving its functioning.” NITI Aayog pointed out the growing debt of NHAI as the primary reason for its evaluation. It said, “NHAI’s debt has increased from INR 23,797 crore in March 2014 to INR 3.48 trillion in March 2022.” Last week, NITI Aayog floated a tender for the selection of a
technical consultant for conducting an evaluation study of road projects and the functioning of NHAI.
The consultant will undertake the study to assess the performance of NHAI on various parameters including its viability, under which it will assess the streams of revenue and capital of NHAI and the trends over the last five years focussing on its ability to service debt and its growing “dependence” on “equity infusion” from the government. It will also look at whether NHAI monitors its finances, capital assets, depreciation and accounting practices on a regular basis and whether it has separate accounting processes in place that are project-specific.
The study will see if NHAI has the process in place to mitigate the financial risks from shocks such as changes in interest rates, increase in costs of raw material etc. DMEO and NITI Aayog have invited proposals for this assignment from national and international firms which have requisite experience in this field and they have been requested to submit their applications by June 12, 2023.
