The Indian government has ambitious plans to generate substantial revenue through monetization efforts in the coming years, estimated at around Rs 2 trillion, equivalent to $24.1 billion, reports rating agency CareEdge.
The National Highways Authority of India (NHAI) is set to build about 4,000 to 4,500 kilometers (equivalent to 2,796.2 miles) of new roads annually over the next three years, the agency reports. The government aims to capitalize on these assets by leveraging Infrastructure Investment Trust (InvIT) or toll-operate-transfer (TOT) models to generate revenue.
The current strategy of the government based on the public-private partnership model has proven successful. Notably, 88% of road projects awarded before March 2020 have reached operational status and are ready for monetization. According to the rating agency, only 12% of the projects awarded before 2020 are facing delays, mainly due to operational weaknesses among their operators.
It is noteworthy that of the delayed projects, a significant 75% belong to sponsors with weak financial profiles, underscoring the importance of strong sponsorship in ensuring project success, as stressed by Maulesh Desai, Director, CareAge Ratings. Strong sponsors are expected to benefit from healthy balance sheets, giving them financial flexibility, while medium sponsors, burdened with substantial portfolios under construction and strict approval conditions, face increased financing risks.
To support these monetization efforts, NHAI launched an InvIT in November 2021 and successfully raised approximately Rs 102 billion by December 2022. The Indian government is now eyeing an additional investment of Rs 100 billion through another tranche of InvITs before the end of the financial year. year, as reported by local media outlets.