Road to improvement may come via abu dhabi

1. Road to Improvement may
Come Via Abu Dhabi
Rs 35,000cr Bet: ADIA keen to take up 50 highway projects on TOT basis

2. Contd…
Abu Dhabi wants to take a $5-billion bet on India, specifically its national highways.
The Abu Dhabi Investment Authority (ADIA), a sovereign wealth und of the emirate,
has expressed interest in taking up 50 highway projects on a toll-operate-transfer
TOT) basis in what will be the first investment of its kind if it happens.
A rough calculation by roads ministry pegs the value of total investment at `. 35,000
crore ($5 billion).
Under the TOT model, roads already built by the National Highways Authority of
India (NHAI) are awarded to the private sector in lieu of an upfront fee. The private
party operates the national highway stretch and collects tolls on it or a long-term
period. “We've already had a few meetings with ADIA. They are keen on taking up
these projects,“ a senior roads ministry official said. “Discussions are still on (over)
whether these projects will be awarded in a portfolio or should every project be
awarded separately. The upfront fee (that the) private partner pays will be
calculated on the future toll collection projections.“

3. Contd…
Abu Dhabi crown prince Sheikh Mohammed bin Zayed Al Nahyan is currently visiting India
and the ADIA proposal is likely to come up for discussion during his meetings.
The government has lined up 104 highway stretches to be awarded through the TOT
model. Under the policy , infrastructure developers, private equity firms and institutional
investors like pension and wealth funds can take up completed highway stretches.
“Once ADIA takes up these projects, we are sure to get more interest from the private
sector,“ the official said.“The model has already been tested across the world and it's 100%
risk-free for investors as well as government.“
Investor interest in the sector had weakened drastically after 2010 due to difficulties
related to land acquisition and getting various approvals besides public opposition to toll
collection.
Projects worth less than ` . 10,000 crore were awarded in FY15. In the previous year, the
value of projects awarded to public-private partnerships (PPPs) was less than ` . 1,000
crore, as stressed companies were unable to raise funds.

4. AMBITIOUS PLANS
The government has ambitious plans to boost investment in the sector and Roads
Minister Nitin Gadkari says he has accelerated highway construction since the
Narendra Modi government took over in May 2014. Gadkari is targeting the award
of 10,000 kilometres in the current fiscal, of which 8,000 km have been given out.
The TOT method also allows the government to better plug leakages in the toll
collection system by handing over operations to the private sector.It will also help
the government generate more funds to create new assets without putting an
additional burden on the exchequer. “The model helps in securitising future cash
flows,“ said Manish Agarwal, leader, infrastructure, PwC India. “It offers high degree
predictability of future revenues to investors. It also transfers the leakage risk to
private sector.“
The government has been trying to come up with innovative financial models to
revive private interest in road projects. Recently, the Cabinet had approved the
hybrid annuity model of constructing highways. Next fiscal, government plans to
award contracts worth ` . 60,000 crore under HAM.

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