Cabinet Allows NHAI To Set Up InvIT, Monetise National Highway Projects

The government on Wednesday gave its nod to the National Highways Authority of India to set up Infrastructure Investment Trust and monetise national highway projects.

InvITs are instruments on the pattern of mutual funds and are designed to pool small sums of money from a number of investors to invest in assets that give cash flow over a period of time.

"The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to the proposal of Ministry of Road Transport and Highways, authorising NHAI to set up InvIT as per InvIT Guidelines issued by SEBI (Securities and Exchange Board of India)," the Ministry of Road Transport and Highways said in a statement.

This will enable NHAI to monetise completed national highways that have a toll collection track record of at least one year and NHAI reserves the right to levy toll on the identified highway, the statement said.

InvIT as an instrument provides greater flexibility to investors and is expected to attract patient capital (for say 20-30 years) to the Indian highway market, as these investors are averse to construction risk and are interested in investment in assets which provide long-term stable returns, it said.

It will also facilitate retail domestic savings and corpus of special institutions (such as mutual funds, Pension Fund Regulatory and Development Authority, etc.) to be invested in infrastructure sector through InvIT.

Roads and highways are the lifeline of the economy, connecting remote and far-flung areas and ensuring efficient transportation on regional as well as pan-India basis, it said.

Development of national highways has a multiplier effect in terms of facilitating trade and enhancing the overall economic development of a region, it added.

In October 2017, the Centre launched Bharatmala Pariyojana, which is the flagship highway development programme of Government of India for development of 24,800 kilometres of roads for a total investment of Rs 5.35 lakh crore.

Given the magnitude of Bharatmala program, NHAI would need adequate funds to complete the projects within the prescribed timelines, it said.

"As a part of this exercise, a workable option is to monetise the completed and operational NH assets to unlock their value and offer attractive schemes to private players to invest in construction of national highways," the statement said.

It stressed that using new and innovative financing vehicles has become inevitable for organisations like NHAI that have limited existing sources of funds.

The then Finance Minister, in his Budget Speech of year 2018-19, had stated that NHAI may consider organising its road assets into Special Purpose Vehicles and use innovative monetising structures such as Toll, Operate and Transfer model and InvlTs.

Based on the learning and experience, NHAI has been actively working on setting up an InvIT to monetise its completed and operational national highways projects with the objective of mobilizing additional resources through capital markets.

NHAI's InvIT will be a trust established by NHAI under the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014.

The InvIT Trust will be formed with an objective of investment, primarily in infrastructure projects (as defined by Ministry of Finance). InvIT may hold assets either directly or through an special purpose vehicle or a holding.