The Union minister for road transport & highways, Nitin Gadkari, and the chairman of the National Highway Authority of India (NHAI) have responded with characteristic aggression to reports about the precarious financial health of the bloated NHAI. But this time, the criticism has come from the prime minister’s office (PMO)
The nub of the matter is that NHAI’s debt soared from Rs40,000 crore in 2014, when the Modi government took over, to an unsustainable Rs1.78 lakh crore in 2019 under Mr Gadkari’s watch. In August, the PMO reportedly wrote to NHAI saying the organisation has become “log-jammed with unplanned and excessive expansion of roads” and that road infrastructure has become financially unviable. It asked NHAI to discontinue construction of roads and monetise assets.
Immediately after that, NHAI’s former chairman told a television channel that NHAI’s contingent liabilities are at least twice its outstanding debt. This adds up to anywhere over Rs3 lakh crore – a number corroborated by those who do business with NHAI. A study by SBI Caps Securities (SBI Caps) corroborates this.
Mr Gadkari is unconcerned. On 9th September, at a press conference to mark 100 days of the Modi government’s second term, Mr Gadkari said, NHAI had no financial problem and would continue its high spending ways. Projects worth Rs5 lakh crore will be announced by the year-end and NHAI is targeting to build 4,500km of roads in FY19-20 against 3,900km in the previous year.
NHAI’s chairman, Nagendra Nath Sinha, speaking at an industry event, was even more dismissive about any criticism. “Either people don't understand what contingent liability is or the numbers have been over-reported.” And, yet, NHAI’s debt is expected to touch Rs2.5 lakh crore (trillion) by the end of this financial year requiring Rs25,000 crore to service interest alone.
So what happened to PMO’s letter? Doesn’t it matter? Mr Gadkari’s response has been to kill the messenger. The NHAI official, who allegedly put the letter on social media, has been suspended and Mr Gadkari has threatened ‘strict action’.
But it is hard to put the genie back in the bottle and concerns about the viability of NHAI’s many projects will continue to be discussed. The government intends to push infrastructure spending to boost consumption and reverse the decline in economic growth. Finance minister Nirmala Sitharaman has earmarked Rs100 lakh crore for infrastructure development, a chunk of which ought to go into road building.
But Mr Gadkari’s statements suggest that he doesn’t need Budgetary support, apart from the Rs90,000 crore that, he says, has already been allocated to his ministry.
Unfortunately, Mr Gadkari tends to make many contradictory statements or assertions that are not backed by commensurate outcomes. For starters, why has NHAI’s massive spending had little impact on consumption and economic growth in the past five years? Hasn’t NHAI’s debt soared because land acquisition costs have gone through the roof? Isn’t this mainly because land acquisition costs have soared?
According to a report by SBI Caps, land acquisition costs are up by an average 30% on an annualised basis since 2013. Add to this the padding of costs by various players, repeated cost escalation due to delays and lack of clearances, and you have unviable projects or non-starters which have no impact on the economy.
NHAI’s growth comes through a combination of Budgetary allocations and borrowings. Mr Gadkari, in his public speeches and press conferences, has asserted that his road projects are not unviable in spite of high land acquisition costs; at the same time, he has said that banks have now turned cautious about funding highways (they already have large exposures to corporate India, including in the failed Infrastructure Leasing & Financial Services).
“We have enough money coming from foreign pension funds, private equity funds who want to buy roads (under the toll-operate-transfer model),” he says. And, yet, NHAI’s key source of funds continues to be public sector institutions, banks and pension funds. Consider this:
The Life Insurance Corporation (LIC) has extended a 30-year loan of Rs25,000 crore to NHAI last year. NHAI expects to raise more funds from LIC this year and also tap the EPFO (Employee Provident Fund Organisation).
On 10th September, State Bank of India (SBI) chairman, Rajnish Kumar, said that the Bank is looking at lending Rs35,000 crore to NHAI through securitisation of toll receipts. Lending to NHAI, a government entity, is a safe bet for the Bank irrespective of whether or not toll collections or cash flows would cover NHAI’s costs.
An implied sovereign guarantee makes this lending risk-free (hence, NHAI enjoys high credit ratings); because, if estimates about toll receipts are wrong or fanciful, the cost will be borne by the exchequer. Mr Gadkari clearly expects a lot more from SBI. He has said, “We can raise Rs100,000 crore to Rs150,000 crore from SBI alone and from other banks also we can go for a similar arrangement.”
But not all lenders are sanguine about lending to State entities. The Maharashtra government, set for elections in two months, has provided a Rs13,000 crore guarantee for interim loans for MSRDC’s (Maharashtra State Road Development Corporation) mega-ambitious and controversial Nagpur-Mumbai Expressway, despite strong objections by the finance department. The cost of this six-lane, 710km road has soared to Rs55,335 crore; land acquisition is incomplete and it faces farmer agitations.
But Mr Gadkari is unfazed. He has promised a 1,250km Delhi-Mumbai Expressway at a stupendous Rs1 lakh crore to be completed before the next general elections. He also insists that the 4-6-8 laning of highways, which is not always necessary, but is perceived as an excuse to impose extortive tolls, will also continue without a pause.
Another issue that Mr Gadkari is oblivious to is the simmering anger among road-users. He does not respond to the outrage over the poor maintenance of tolled roads, sloppy toll collection causing long delays, the repeated collection of tolls and steady escalation in charges.
“Toll is never going to end. Even after the cost has been recovered from the projects, the toll collection will continue. NHAI getting toll income in perpetuity is a very good proposition,, he declares with total insensitivity.
Mr Gadkari has also steadfastly ignored pleas from transport unions who went on strike in 2015 on the issue of delays at toll plazas. They cited a 2012 study by Transport Corporation of India (TCI) and IIM Kolkata which said tolls cost the country Rs60,000 crore a year due to delays and stoppages.
Interestingly, transporters were not against tolling—they had offered to reimburse the government for all toll collection, including private cars, based on data provided by toll operators. It was rejected, giving rise to suspicion that policy-makers have a vested interest in continuing with the inefficient toll collection system.
No wonder, the promise of 100% ETC (electronic toll collection) at all toll plazas is still largely talk. Activist Sanjay Shirodkar says, in most places there are no dedicated lanes, awareness or discipline. He has proved that bids for toll and maintenance contracts are based on massive under-reporting of traffic data, in collusion with government organisations.
When toll rates and frequency of collection has increased, why haven’t toll collections? The SBI Caps report of August 2019 says that toll collection has grown by a modest 6% per km (from Rs55 lakh/km in FY12-13 to Rs80/km in March 2019). And, yet, the minister is gung-ho about tolling people in perpetuity!
There is a lot to be done beyond tolling. For instance, another report by TCI and IIM Kolkata in 2014-15 on “Operational Efficiency of Freight Transportation by Road in India” has estimated the cost of delays (due to check posts, etc) at $6.6 billion per year and the cost of additional fuel consumption due to delays was estimated at US$14.7 billion per year.
This was to be addressed by the E-way bills under the Goods and Services Tax (GST). But Mr Shirodkar says that this only addresses the tax issue; other stoppages causing delays remain unaddressed.
Addressing this is also a part of Mr Gadkari’s remit, but he has preferred the easy option of increasing fines for all traffic offences to such ridiculous levels that it has led to a harsh backlash and even violence.
Significantly, the Gujarat government has slashed fines for compoundable offences, announced by the Centre, by a sharp 90% and the Maharashtra government, which has not notified the new fines, also seems headed that way.
Since both states have strong Bharatiya Janata Party (BJP)-led governments, one wonders whether this is just a self-serving pre-election decision by the two states or an indicator of political differences at the top.
No large infrastructure project in India is complete without massive cost overruns. Often, cost escalation is announced even before construction commences and final costs are sometimes a multiple of the original estimate.
This is often due to the collusive nexus between project operators, government organisations and politicians. With banks and lenders insisting on state guarantees, the eventual cost of unviable projects or losses will be borne by the people.
In the 1990s, the United Progressive Alliance (UPA) government, led by the Congress, permitted high-cost power projects with guaranteed returns. We, as consumers, continue to pay very high tariffs two decades later, when power generation costs have fallen drastically.
Unless Mr Gadkari’s bravado about pressing ahead with unviable projects is checked, future generations will pay the price for expensive roads and freight transportation.
In lok sabha during debate on 23-7-2019 , minister Nitin Gadkari admitted that all DPR(detailed project reports ) are made false and 70 years retired expert engineers presence is beyond my knowledge
Most of the National highways are being built on older state highways WITHOUT IMPROVING SHARP CURVES which is a major cause of road accidental deaths. Ironically, top experts of NHAI road safety cell (RSC) themselves have approved such alignment of NH making people vulnerable to accidental deaths.
So section-198A of amended MV Act-2019 needs action against liable corrupt NHAI officials, fake experts, consultants liable for sharp curves on new roads inaugurated in the last four years.
All NGOs on road safety have fully ignored sharp curves of the roads on NH,SH, district roads, village roads under PMGSY.
The NHAI Chariman's stance is merely singing the tune of his political masters. Why doesnt he talk with the facts and figures rather than merely dodging the question.
Is this the case of one upmanship by one particular Ministry over the PMO's office ?
Its the people who have to suffer and bear consequences.
Roads were first built with taxpayers money. Then govt asked us to pay tolls on them, and now even existing roads are being sold to toll collectors in the name of asset monetisation. This is a scam.
The tolls are basically a tax. In the garb of user charges and GST, govt has basically added taxes worth lacs of crores per year on the economy. On top of trying to kill all flow of funding in the unorganised sector in the name of demonetisation.
The basic purpose of GST - to capture tax evasion by invoice matching - has not even been implemented. Even the CAG thinks GST is a failure.
Now the govt. wonders why has growth disappeared. Can the govt please borrow some financial and economic brains?
It appears Minister Gadkari is taking all these liabilities too lightly and trying to put lipstick on pig's mouth by calling NHAI an AAA rated agency. NHAI spending crores of public money is not only full of corruption (big black money generator) but has no financial plans and vision. PMO's intervention is good in public interest in the sense it will bring big structural changes in NHAI which at present is being in hold of status-quoist enjoying tax payers money without any accountability on non viable projects.
Why should NHAI start the project if the complete land is not fully available? The price over runs due to delay would get substantially reduced if the project starts only when -say 80% land is available.
The traffic data should be collected independently from private organisation like BAI, particular State Government and also by NHAI itself to decide about the density/ toll etc.
Don't worry. As long as the govt builds a big status in the middle of each national highway, there will be no problem and even better nobody will complain about tolls.
To set things right, NHAI should first utilize it's funds to reduce contigent liabilities to below 10000 cr by paying off arbitration awards instead of misusing the legal system to wilfully delay payment of contractual dues. This will sharply reduce NPAs in the banking system and enable infrastructure developers to raise funds to go in for BOT projects.
Further, no project should be started until the state government involved provides all the land and permissions for free - this will dramatically reduce execution delays and cut costs by 40-50% per km.
For critical but unviable projects, NHAI will need to continue with EPC or HAM approach. NHAI should go in for low cost borrowings from PF, pension and insurance funds to keep interest cost below 6%
* Is this becoming the mother of all scams. The IL&FS is a pointer. Reportedly their road projects sank the company. Everything was hunky dory till it collapsed like a pack of cards one fine day.
* Can LIC, SBI be misused to finance the unviable projects at will by forcing them to cough up the moolah. If even the interests cost cannot be met then how viability is feasible? why we are into creating further NPAs.
* Any project implementation should be linked to results. Based on review & positive results, further works can be carried out.
* PMs letter is information under RTI therefore why suspend the official for putting something in public domain.
* If everything is hunky dory then please present the self assessment of benefits derived in public domain & how the money will be collected?
* How can tolls run in perpetuity? At Dahisar, (Mumbai) toll is collected for more than 30 years !
* Foreign pension funds may be putting money but once they know that all this unviable stuff then how will you tackle the problems & complications. Things cannot be hidden for long. Lopsided approach does not help?
Unplanned investment by NHAI has put it in big debt which highway minister does not want to recognize despite PMOs advise. Restructuring of NHAI is essential as presently corrupt & status quoist interest has made it unwise and unaccountable body.
Now that Bankruptcy & Insolvency Act is in force all these organizations will just file petition to declare them as insolvent .That simple ☺ï¸
Plundering of Aaam Admi & taxpayers
By all parties in power always
Modi himself may be above board & trying his best to stem the rot of 70 years
He is a hard task master no doubt
Same time too many things attempted too soon & the absolute majority is helping the cause in taking bold decisions as some of their leaders are not corrupt & work in unison
One thing is sure the scams of the past can not be set right immediately
Point is old guards in BJP like Yeddurappa Reddy etc are escaping
Finally common man has to face death in pot holes 😊when crores are spent in infrastructure
Then the recovery of mind blogging amounts is a distant dream by monetization of assets
NHAI is a masterly play, scams are made out to be in the National interest by the Bharathiya Jhumla Party:
Here is my take on tolls:
Toll rates are based on “what the market will bearâ€.
The basis is that if Non VIP Citizens want to enjoy a luxury called “roadsâ€, they must pay for it .(i.e. conveniently negating the Government’s responsibility to utilize the money it loots from us in the form of taxes, deficit finance, inflation and so on, in a prudent manners so as to provide us with sound infrastructure. This used to be taken for granted before 1947 and continued, albeit with progressively deteriorating road conditions, reflective of the galloping corruption, till 1988 when Rajiv Gandhi decided to increase the plunder for the Kleptocrats and created yet another PSU known as the National Highway Authority of India.)
This is to say, the basis follows the same principle as taxation in India which is to steal as much as possible from the Non VIP citizen for the benefit of the VIP citizen. For example, the politicians, bureaucrats, police and judiciary are exempted from paying tolls because they own the British Empire that has come to be known as the Indian Rapeublic since 1949. They have separate VIP by passes to toll gates! Which, in effect, means that they are looting money from the Non VIPs for the luxury of a “road†which is bu a free essential to the Kleptocracy.
Remember the Bangla Desh relief stamp of 15 paise that had to be applied on post cards costing 10 paise in 1972? The stamp was removed by merging the additional cost into the original cost which is to say, Post Cards were raised to 25 paise and the Bangla Desh stamp was removed. So Bangla Desh liberation became an excuse to render a postal hike of more than 100% acceptable to the people of India and then became permanent. This is exactly what happens to every form of expropriation of money from the Non VIP public for the exclusive benefit of Government and to maintain its Satraps and Nabobs in obscene luxury like medieval barons lording it over the abysmal, inhuman life styles of their serfs, the Non VIP citizens.
So, as tolls are an addiction of India’s Kleptocratic Government, tolls will go on forever. Like “reservationsâ€.
This reminds me that, even until the 1960s, the Highways, Roads, Hospitals, and Corporation Schools established by the Maharajas of Mysore before 1947 were not only free but excellent. It was only after the 1960s that the Indian National Congress applied the tenets of the British Empire on the newly conquered and subjugated Mysore State and began to plunder it for the benefit of the Mughals like Nehru and his gang of thugs sitting in Delhi.
Replied to SuchindranathAiyerS comment 7 years ago
Great article and good comments by Mr Aiyer,
kleptocracy comes out of unethical society/governance and ordinary person is a victim of it. People looking for improvement or sea change have been disappointed by successive governments/political leaders including modi and kejriwal.
Replied to SuchindranathAiyerS comment 7 years ago
Mr SuchindranathAiyerS, such an excellent and incisive analysis. Refer to the book, 'India's Big Government' by Vivek Kaul to better understand the plight of the underdogs like us vis a vis our overlords.
Look forward to more incisive analysis in the future.
Thank you.
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Access is given for all articles published during the week (starting Monday) your subscription starts. For example, if you subscribe on Wednesday, you will have access to articles uploaded from Monday of that week.
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इसका कारण रोड इंजीनियरिंग है। डीपीआर गलत
बनाते हैं हर डीपीआर गलत बनती ह।मैं डिपारà¥à¤Ÿà¤®à¥‡à¤‚ट को बहà¥à¤¤ बार कहता था, पर मैं आज यहां कमिट करूंगा ताकि हमारे जो
सेकà¥à¤°à¥‡à¤Ÿà¤°à¥€ गैलरी में बैठे हैं, उनको लिखित में इसका ऑरà¥à¤¡à¤° निकालना पड़े। पहली बात, इंडीपेंडेंट
इंजीनियर यानी 70 साल का टोपी पहना हà¥à¤† कोई वà¥à¤¯à¤•à¥à¤¤à¤¿ आता है। à¤à¤• रिटायरà¥à¤¡ आदमी इतने बड़े
रोड पर कहां जाता है, यह मà¥à¤à¥‡ à¤à¥€ मालम नहीं है। यह पà¥à¤°à¤¥à¤¾ बहत गलत है। मैं आज घोषणा करता हूं
कि इंडीपेडेट अथॉरिटी इंजीनयर की जो पà¥à¤°à¤¥à¤¾ है, उसको बंद करेगे।
So section-198A of amended MV Act-2019 needs action against liable corrupt NHAI officials, fake experts, consultants liable for sharp curves on new roads inaugurated in the last four years.
All NGOs on road safety have fully ignored sharp curves of the roads on NH,SH, district roads, village roads under PMGSY.
Is this the case of one upmanship by one particular Ministry over the PMO's office ?
Its the people who have to suffer and bear consequences.
The tolls are basically a tax. In the garb of user charges and GST, govt has basically added taxes worth lacs of crores per year on the economy. On top of trying to kill all flow of funding in the unorganised sector in the name of demonetisation.
The basic purpose of GST - to capture tax evasion by invoice matching - has not even been implemented. Even the CAG thinks GST is a failure.
Now the govt. wonders why has growth disappeared. Can the govt please borrow some financial and economic brains?
It appears Minister Gadkari is taking all these liabilities too lightly and trying to put lipstick on pig's mouth by calling NHAI an AAA rated agency. NHAI spending crores of public money is not only full of corruption (big black money generator) but has no financial plans and vision. PMO's intervention is good in public interest in the sense it will bring big structural changes in NHAI which at present is being in hold of status-quoist enjoying tax payers money without any accountability on non viable projects.
Let us hope for the best
The traffic data should be collected independently from private organisation like BAI, particular State Government and also by NHAI itself to decide about the density/ toll etc.
Further, no project should be started until the state government involved provides all the land and permissions for free - this will dramatically reduce execution delays and cut costs by 40-50% per km.
For critical but unviable projects, NHAI will need to continue with EPC or HAM approach. NHAI should go in for low cost borrowings from PF, pension and insurance funds to keep interest cost below 6%
* Can LIC, SBI be misused to finance the unviable projects at will by forcing them to cough up the moolah. If even the interests cost cannot be met then how viability is feasible? why we are into creating further NPAs.
* Any project implementation should be linked to results. Based on review & positive results, further works can be carried out.
* PMs letter is information under RTI therefore why suspend the official for putting something in public domain.
* If everything is hunky dory then please present the self assessment of benefits derived in public domain & how the money will be collected?
* How can tolls run in perpetuity? At Dahisar, (Mumbai) toll is collected for more than 30 years !
* Foreign pension funds may be putting money but once they know that all this unviable stuff then how will you tackle the problems & complications. Things cannot be hidden for long. Lopsided approach does not help?
Unplanned investment by NHAI has put it in big debt which highway minister does not want to recognize despite PMOs advise. Restructuring of NHAI is essential as presently corrupt & status quoist interest has made it unwise and unaccountable body.
Let us hope for the best.
Plundering of Aaam Admi & taxpayers
By all parties in power always
Modi himself may be above board & trying his best to stem the rot of 70 years
He is a hard task master no doubt
Same time too many things attempted too soon & the absolute majority is helping the cause in taking bold decisions as some of their leaders are not corrupt & work in unison
One thing is sure the scams of the past can not be set right immediately
Point is old guards in BJP like Yeddurappa Reddy etc are escaping
Finally common man has to face death in pot holes 😊when crores are spent in infrastructure
Then the recovery of mind blogging amounts is a distant dream by monetization of assets
NHAI is a masterly play, scams are made out to be in the National interest by the Bharathiya Jhumla Party:
Here is my take on tolls:
Toll rates are based on “what the market will bearâ€.
The basis is that if Non VIP Citizens want to enjoy a luxury called “roadsâ€, they must pay for it .(i.e. conveniently negating the Government’s responsibility to utilize the money it loots from us in the form of taxes, deficit finance, inflation and so on, in a prudent manners so as to provide us with sound infrastructure. This used to be taken for granted before 1947 and continued, albeit with progressively deteriorating road conditions, reflective of the galloping corruption, till 1988 when Rajiv Gandhi decided to increase the plunder for the Kleptocrats and created yet another PSU known as the National Highway Authority of India.)
This is to say, the basis follows the same principle as taxation in India which is to steal as much as possible from the Non VIP citizen for the benefit of the VIP citizen. For example, the politicians, bureaucrats, police and judiciary are exempted from paying tolls because they own the British Empire that has come to be known as the Indian Rapeublic since 1949. They have separate VIP by passes to toll gates! Which, in effect, means that they are looting money from the Non VIPs for the luxury of a “road†which is bu a free essential to the Kleptocracy.
Remember the Bangla Desh relief stamp of 15 paise that had to be applied on post cards costing 10 paise in 1972? The stamp was removed by merging the additional cost into the original cost which is to say, Post Cards were raised to 25 paise and the Bangla Desh stamp was removed. So Bangla Desh liberation became an excuse to render a postal hike of more than 100% acceptable to the people of India and then became permanent. This is exactly what happens to every form of expropriation of money from the Non VIP public for the exclusive benefit of Government and to maintain its Satraps and Nabobs in obscene luxury like medieval barons lording it over the abysmal, inhuman life styles of their serfs, the Non VIP citizens.
So, as tolls are an addiction of India’s Kleptocratic Government, tolls will go on forever. Like “reservationsâ€.
This reminds me that, even until the 1960s, the Highways, Roads, Hospitals, and Corporation Schools established by the Maharajas of Mysore before 1947 were not only free but excellent. It was only after the 1960s that the Indian National Congress applied the tenets of the British Empire on the newly conquered and subjugated Mysore State and began to plunder it for the benefit of the Mughals like Nehru and his gang of thugs sitting in Delhi.
kleptocracy comes out of unethical society/governance and ordinary person is a victim of it. People looking for improvement or sea change have been disappointed by successive governments/political leaders including modi and kejriwal.
Look forward to more incisive analysis in the future.
Thank you.