As part of innovative modes of financing to meet India’s huge infrastructure appetite, insurance giant LIC has agreed to offer Rs 1.25 lakh crore line of credit by 2024, to fund highway projects, Union Minister Nitin Gadkari said.
Keen on timely execution of the Rs 8.41 lakh crore ambitious Bharatmala project that aims to lay a grid of highways pan-India, the Road Transport and Highways Ministry has been looking to harness various sources of finances including pension and insurance funds.
“LIC has offered us Rs 25,000 crore in a year and Rs 1.25 lakh crore in five years They have agreed in principle. We will rope in these funds in highways construction,” Gadkari told PTI in an interview.
Life Insurance Corporation of India (LIC) Chairman R Kumar had called on Gadkari last week.
The Minister said that the line of credit will be used to fund the ambitious Bharatmala project, the revised cost of which has reached Rs 8.41 lakh crore.
Bhartmala was approved initially at a cost of Rs 5.35 lakh crore, which was risen later on account of land acquisition costs. In the first phase, 34,800 km including 10,000 kilometres of balance NHDP (National Highways Development Project) will be upgraded.
Gadkari said the Bharatmala programme will be funded through cess, toll revenue, market borrowings, private sector participation, insurance fund, pension funds, masala bonds and other initiatives and the LIC credit line was one such initiative.
The funds will be raised for 30 years and the interest rate will be revised every 10 years, as per initial plans.
National Highways Authority of India (NHAI) and LIC officials will sit down and draw the modalities including finer details like interest rates, debt servicing and other details,’ said an official.
The borrowings will be in the form of bonds to be issued by the NHAI.
“We don’t have dearth of funds,” the Minister said adding that as the projects will be completed these will be put up for monetisation and the funds will be ploughed back to highway construction.
The NHAI is eyeing Rs 4,995 crore from monetisation of third tranche of 566 km of highways under TOT (toll, operate and transfer) model. There are nine highway stretches of 566.27 km in TOT Bundle-3 in states of Uttar Pradesh, Bihar, Jharkhand and Tamil Nadu.
The first bundle under the TOT model had fetched NHAI Rs 9,682 crore. The first bundle had a total of nine stretches involving 681 km and was awarded to Macquarie.
The third auction assumes significance given that this is coming after an unsuccessful second bundle where investors quoted a discount to NHAI’s base price.
Gadkari said that besides monetisation, the Ministry was also in talks with banks for funds. “Also, the Finance Ministry has given us approval to raise Rs 75,000 crore this fiscal,” he said.