The Narendra Modi administration wants companies belonging to friendly foreign governments to build India's highways.
The road ministry has sought the finance ministry's permission for a policy that will allow such investment.
The government has received feelers from public sector undertakings in Malaysia and Japan for investment in upcoming highway projects. The road ministry would not have to go through the process of seeking tenders and bids for a highway project under this arrangement, allowing for faster implementation.
"Exim banks of foreign countries cannot fund their own developers for our highway projects. But we are hopeful this restriction will be removed to kick start infrastructure development in the country," a senior official said. The ministry has set itself an ambitious target of awarding projects to the tune of Rs 3.5 lakh crore in this financial year.
The government is planning to launch 1,231 projects that will cover 37,000 km in the next two years. Having awarded more than five projects under the build operate transfer or BOT toll mode this year, the government is upbeat about the prospects of public private partnership (PPP) projects. However, a majority of projects are still dependent on government funding and are getting awarded through the engineering, procurement and construction ( EPC) route.
Experts agree that governmentto-government (G2G) funding opens up a new route of financing for the highway sector, which is in dire need of equity infusion. "Government may identify stretches which may not be viable on PPP but make economic sense for investment from foreign government agencies," said Vikash Sharda, associate director, infrastructure, PwC India. In April this year, road ministry officials had visited Malaysia to showcase 20 projects to the Construction and Industrial Development Board (CIDB).
Malaysian officials are expected to visit India soon to evaluate these projects for investment internally under the hybrid-annuity model. Under this, 60% of the project cost has to be borne by the private investor.
The remaining 40% will come from the National Highways Authority of India in five equal installments. The government will also bear the revenue risk in projects where there is a low anticipation of traffic flow. Highway projects covering 8,000 km stretch and worth Rs 1 lakh crore were awarded by the government in FY15. The government will be selling road projects covering 5,000 km worth about Rs 1 lakh crore after they are completed through the EPC route.