Mumbai: The government is considering setting up an independent financial institution to cater exclusively to the roads and highways sector along the lines of Power Finance Corp. Ltd (PFC), minister for road transport, highways and shipping Nitin Gadkari said in an interview.

The proposal is still at the evaluation stage with the ministry, the minister said.

“We are planning to set up a vehicle in National Highways Authority of India with participation from foreign investors, say an Infrastructure Finance Corp., on the lines of Power Finance Corp.," Gadkari said.

“The power ministry has a finance arm. The road ministry has a much larger scope of work than power, but we don’t have such a financing arm. Investors from Japan and (South) Korea are keen on such structures," he added.

PFC was set up in 1986 and is currently the largest non-banking financial company in the country with a loan book size of Rs2.4 trillion in the power and allied sectors in India and abroad.

“NHAI (National Highways Authority of India) can put Rs1,000 crore in equity and an investor can put another Rs1,000 crore and we can create this finance arm. It will be a win-win situation for both the parties. We can raise a large corpus for funding infrastructure through this, given NHAI’s strong credentials," Gadkari said.

In 2015, the government set up the National Investment and Infrastructure Fund (NIIF) to mobilize funding for the infrastructure sector with an initial targeted corpus of Rs40,000 crore, of which Rs20,000 crore was to be invested by the government.

The remaining Rs20,000 crore was to be raised from long-term international investors, including sovereign wealth funds, insurance and pension funds and endowments. However, a 3 June report by The Indian Express suggest that in the 18 months since its inception, NIIF has not made a single investment or received any investment commitment from any

third party.

The government is also working on raising capital by monetizing the operational road assets of NHAI, which has drawn up a list of 105 projects to be monetized over a period of time.

“We are going to monetize Rs1.25 lakh crore worth of NHAI projects," said Gadkari.

The ministry of road transport and highways and shipping is also busy on the capital expenditure front.

“Under the hybrid annuity model that we started after coming to power, we have given out projects worth Rs1.5-1.75 lakh crore. Now we are planning around 4-5 projects on Mumbai-Baroda stretch, which are worth around Rs47,000 crore and they will all be under the hybrid annuity model," said Gadkari.

Under this model, the government shares 40% of project cost and allocates funds to the developer to start work. The remaining investment would come from the developer over the duration of the project’s execution.

Revenue collection would be the responsibility of the NHAI; developers are paid in annual instalments over a specified period of time.

Orders worth Rs1.5 trillion have been given out so far under the Sagarmala project, Gadkari said.

Sagarmala is the government’s coastal and port city development plan, which includes preparing the manpower needed for Chinese-style coastal economic zones where manufacturing units will be set up to generate jobs.

For investments in the infrastructure sector to see a strong revival, interest rates need to come down further, Gadkari said.

“I believe, in infrastructure, the interest cost should not be more than 7%. Lower interest cost is very important for the sector. We are headed in that direction and I hope that in the next 2-3 years it will come down to 7%," he said.

The government is also looking at divesting Dredging Corp of India Ltd (DCIL), said Gadkari.

The proposal for the divestment of DCIL is with the finance ministry and the divestment should happen over the next few quarters, Gadkari said. The ministry is not looking at any other divestments, he added.

On 4 August, Mint reported that Mercator Ltd (earlier known as Mercator Lines Ltd), which operates shipping, dredging, coal, and oil and gas businesses, had shown preliminary interest in acquiring state-owned DCIL. The government owns 74.47% of DCIL.

As of market closing on 10 August, the market capitalization of Dredging Corp. stood at Rs1,581 crore.

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