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The ratings agency has said that the pace at which projects are being awarded as well as the actual execution should be stepped up even further
Fitch Ratings today said that the National Highways Authority of India (NHAI) will have to step up the pace of awarding and executing projects if it has to meet the target of laying 20 km of roads daily, reports PTI.
While the ratings agency noted that there has been improvement in these areas of late, it called for a further speeding up of the process.
Referring to the government’s acceptance of the BK Chaturvedi Committee recommendations on NHDP (National Highways Development Programme), it said that the move has increased the pace of awarding projects from December 2009.
“These are encouraging signs; however, to achieve the daily target to construct 20 km of roads, the pace at which projects are being awarded as well as the actual execution has to step up even further,” Fitch said.
It also cautioned NHAI against private sector counterparty claims and said that they could lead to additional burden on resources requiring rework on finances.
“Additional burden on the entity's resources may stem from private sector counterparty claims that are currently locked up in various dispute redressal processes,” Fitch said. “These claims may necessitate a rework of NHAI’s financing plans.”
Fitch also expressed concern over limited participation of private players in the highways development programme.
“Limitations on the private sector's capacity to participate in the highway development programme could impose added financial strain on NHAI.”
Fitch, however, maintained its ‘AAA’ ratings—the best risk within a country—of NHAI as well as its Rs 8,000-crore long-term debt programme.
“Fitch Ratings has today affirmed the national long-term rating of NHAI at 'AAA(ind)' and its Rs80-billion long-term debt programme at 'AAA(ind)',” the agency said in a statement.
It noted that against a planned issue size of Rs4,000 crore in the financial year 2009-10, the authority has received subscription of Rs902 crore as of 20 March 2010.
It said that during 2010-11, NHAI plans to issue bonds worth Rs4,000 crore.
Fitch said that its ratings factor in substantial support NHAI has received in the form of fuel cess and grants from the government.
Fuel cess is a major component of NHAI's finances and in FY'10, it constituted 84.7% of NHAI's total finances at Rs7,400 crore, representing an increase from 43.3% in FY’06, it said.
The ratings agency also pointed out that NHAI will need stable policies and continuity of senior management to be able to meet its ambitious targets. It said, “Frequent policy changes and lack of continuity of senior management in the past have caused NHAI to under-achieve its physical targets, and in Fitch's view stability on both of these factors would be necessary in order to bring NHAI's ambitious plans and targets to fruition.”
NHAI is an autonomous body, set up to develop, maintain and manage national highways.