NHAI plans Rs3,000 crore bond issue in 2009-10

The National Highways Authority (NHAI) of India plans to raise Rs3,000 crore ($600 million) in the current financial year through issue of tax-free bonds to fund its various ongoing projects.

The NHAI is responsible for the development, maintenance and management of the country's national highways through implementation of various phases of National Highways Development Projects (NHDP).

Currently, NHAI's arterial network comprises 66,590km linking all major regions of the country. Although it is only 2 per cent of the country's total road network, it carries about 40 per cent of the road traffic.

The NHAI's projects worth Rs13,000 crore are stuck due to want of funds despite the government's thrust in infrastructure sector to moderate the impact of economic slowdown.

"We have fixed a target of raising Rs3,000 crore through tax-free bonds in the financial year 2009-10. The bonds will be open for subscription very soon. "NHAI member (finance) A Didar Singh said on Wednesday.

The NHAI is also in talk with the Asian Development Bank (ADB) for a loan of $400 million to fund its projects, part of which is expected this year, he said.

In 2008-09, the authority raised Rs1,700 crore through tax-free capital gains bonds which carried a credit rating of ''AAA/Stable'' by CRISIL and ''AAA/ind'' by Fitch Ratings.

The 3-year bonds of Rs10,000 face value had a coupon rate of 5.75 per cent per annum which was increased to 6.25 per cent from 1 November 2008. The bonds were exempted from capital gains tax under section 54EC of Income Tax Act.

Although, the NHAI proposed to bid out 60 projects worth Rs70,000 crore in 2008-09, most of the projects failed to generate any response and only received bids for 22 projects, due to the looming financial crisis.

Moreover, the NHAI had reduced the proportion of grant allotted to private partners from 20 per cent to 10 per cent for all the nine projects under NHDP phase V which prompted many private parties to opt out of the bid.

In 2009-10, the authority plans to invite bids for 78 projects.

To propel infrastructure financing, the government has allowed state-run infrastructure financing company to raise Rs10,000 crore through tax-free bonds by March 2009 to support a public-private-partnership programme of Rs1,00,000 crore in the core sector, including highways.

The total estimated cost of the NHDP projects is Rs54,000 crore ($13.2 billion) on 1999 prices. The funding components include 37 per cent from cess on petrol and diesel, 37 per cent from WB and ADB, 18.5 per cent from market borrowings and the balance 7.5 per cent private sector participation.

In a rather disgraceful incident involving an NHAI official, the Central Bureau of Investigation (CBI) on Thursday arrested in Delhi a project director of Dhanbad (Bihar) sector for allegedly accepting a Rs2.5-lakh bribe from a contractor.