Why is the National Highway Authority of India (NHAI) farming out large sections of the country’s highways to private parties to collect additional tolls despite raising funds from elsewhere, notably a cess on petrol and diesel?

The answer possibly is that the funds raised through the cess, apart from the annual Budget Outlay, market borrowings and private sector contribution, are insufficient to fund the road construction, reconstruction and modernization efforts.

IndiaSpend’s Danielle Collaco filed a Right To Information (RTI) petition with the NHAI asking these questions including on the quantum of cess collected. The petition has come back with part-answers. While we await details, it is clear that private sector contribution to the road building pie is rising steadily. And with this, the cost of travelling by Indian roads is increasing too.

Maintaining India’s Roads

As a background, the NHAI manages a network 71,772 km of roads. National highways constitute only about 1.7% of the road network but carry about 40% of total traffic. NHAI’s mandate is to implement the National Highways Development Project (NHDP) India’s largest highway project.

The Golden Quadrilateral is the first phase of the NHDP. It connects the 4 main metropolises; Delhi, Mumbai, Chennai and Kolkata. The total length of the project is supposed to be 5,846 km. As on January 2012, about 5,829 km were completed.

Let’s now look at the spends and income at this point. First, how much cess does the Government collect? NHAI’s response to IndiaSpend’s RTI reveals that the Authority received Rs 7,405 crore as cess during 2009-10 while it received Rs 8,441 crore as cess during 2010-11. The response also states, as we know that the cess is not directly collected by NHAI, rather by the Finance Ministry which allocates it to different organisations.

Collections From Tolls

And how much does the NHAI collect from the private tolls that are running presently? In the RTI reply, NHAI said that during 2010-11, the total collection from highway tolls was Rs 2,482 crore while during 2009-10, it was Rs 1,940 crore.

As a background, the NHAI offers projects on a Build Operate and Transfer (BOT) basis. Under the BOT model, the government gives the contract of building roads to a private party which agrees to finance, build, control and operate the facility for a limited period of time, which is normally 20 to 35 years.

After this period ends, the responsibility of the project is transferred to the Government. NHAI uses its funds to set up a Special Purpose Vehicles which act as borrowing funds for the private companies. The funds borrowed from the SPVs are repaid through toll revenues.

Other Fund Raising Methods

The NHAI also raises funds through market borrowing; NHAI raised Rs 10,000 crore in tax free bonds that got listed in February 2012. The funds approved and received by the National Highways Authority of India are showcased in the table below.

The NHAI also gets loan assistance from international funding agencies like the World Bank, Asian Development Bank or other overseas agencies like the Japanese Bank of International Co-operation

Funds Approved and Received

The NHAI received Rs 14,209 crore during 2010-11 which is about Rs 4,000 crore less than what was budgeted for it during Union Budget 2010-11. This is however, much higher than the funds that were received by NHAI during the previous two years. The RTI response by NHAI states that it received Rs 8163.63 crore just from the Ministry of Roads during 2009-10 and Rs 11,480.19 crore during 2010-11.

Funds Received By NHAI

ParticularsActual 2008-09 (in Rs cr)Actual 2009-10 (in Rs cr)BE 2010-11 (in Rs cr)Actual 2010-11 (upto March 11) (in Rs cr)
External Assistance*1,894.00*340.00400#400
Additional Budgetary Support (J&K Projects/SARDP-NE)0.000.00200360
Funds for EPE (Eastern Peripheral Expressway)0.00211.72801.68173.25
IEBR (Capital gain Tax Exemption Bonds u/s 54EC of Income tax Act)1,604.561,148.052,138.10
IEBR (-ADB Loan)
Ploughing back of Funds deposited by NHAI in Construction Federation of India against toll collection, Negative Grant and Revenue Sharing (Received Rs 1623 cr upto March 2011)0.000.001,6232,213.79
SUB TOTAL10,471.039,104.4718,328.6613,726.08
Negative Grant5.407.210.000.00
NH (O) Works- Special Projects in Tamil Nadu & West Bengal, Mehrauli (Delhi) with Gurgaon (Haryana) in NH-236 and MH-5054 for Special Projects of 2 laning of balance NH Network in the state of Madhya Pradesh159.00200.00200483

*Includes grant of Rs 272 cr and loan of Rs 68 cr

#Includes grant of Rs 320 cr and loan Rs 80 cr

##Received Rs 1,962 cr on 30.06.10, Rs 1,962 cr 28.09.10, Rs 1,962.25 cr on 30.12.10 and Rs 2554.69 cr on 31.03.11

Source: RTI Answered by NHAI

NHAI’s Expenditure

The Right To Information Application also gave a summary of expenditure from 2008 to 2011. As you can see from the table below, NHAI spent Rs 29,578 crore during 2010-11, which is lower than the target that had been set during Budget 2011. The expenditure by NHAI during 2011 is however higher than the previous two years.

NHAI's Expenditure From 2008 To 2011

ParticularsActual 2008-09 (in Rs cr)Actual 2009-10 (in Rs cr)BE 2010-11 (in Rs cr)Actual 2010-11 (upto March 11) (in Rs cr)
Project expenditures out of Govt Funds10,002.6710,559.6014,424.8612,548.03
Market Borrowings & Annuity Repayments2,018.282,394.302,423.051,675.88
Sub Total12,020.9512,953.9016,847.9114,223.91
Expenditures by Private Sector (including SARDP-NE)8,184.738,572.5421,256.0015,354.37
Grand Total 20,205.6821,526.4438,103.9129,578.28

Source: RTI Answered by NHAI

The expenditure by the private sector constitutes about 50 percent of the entire NHAI expenditure. The private sector expenditure has also increased by almost 80 percent from 2009-10 where it was Rs 8,572.54 crore to Rs 15,354.37 crore in 2010-11.

Lets step back and take a look at the allocations in Union Budget 2012-13, announced on March 16th. The Finance Minister had increased the overall allocation to the Ministry of Road Transport and Highways by 14 percent to Rs 30,798 crore. The NHAI was allocated Rs 11,436 crore, compared to Rs 10,343 crore in the previous year’s budget.