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Government asks LIC to fund road expansion projects
(The road transport and highways…)
NEW DELHI: The Indian government will be leaning on the stateowned Life Insurance Corporation of India (LIC), India's largest insurer, to fund its ambitious road expansion plans and the insurer is set to open its purse strings for highways development, boosting the government's aim to step up road construction to 40 kms a day.
The road transport and highways ministry hopes to sign an agreement with LIC for the purchase of annual bonds issued by the National Highways Authority of India (NHAI).
In the current financial year, LIC is likely to subscribe NHAI bonds worth at least Rs 10,000 crore, a senior road transport and highways ministry official said and an agreement to the effect is expected to be signed soon. The ministry will use the money raised through LIC for four-laning of highway projects.
Roads transport and highways minister NitinGadkari confirmed that his ministry was in talks with LIC to raise funds. LIC did not respond to email query sent by et . The highways ministry has set a daily road construction target of 40 kms. The finance ministry has allowed NHAI to raise bonds worth Rs 50,000 crore other than Rs 15,000 crore through tax-free bonds. The NitinGadkari ministry has been in talks with LIC for raising money for almost six months. It had earlier sought Rs 50,000 crore in various tranches from the stateowned life insurer.
"We are finalising the contours of the agreement. LIC has assured us that they would subscribe to NHAI bonds," an official with the ministry said.
In the current financial year, the government plans to undertake the construction of 15,000 kms of national highways that would cost around Rs 1.5 lakh crore, while the ministry has received a budgetary allocation of Rs 57,000 crore.
MASALA BONDS NHAI is also planning to raise at least Rs 7,000 crore through masala bonds. Masala bonds refer to rupee denominated bonds, which are issued overseas.
The money raised would mostly be used for constructing by-passes along the national highways. "We are consulting SBI Caps and plan to come up with an expression of interest soon. We will look at raising the money at the least borrowing cost of around 5%," the official said.
However, masala bonds are yet to take off months after the Reserve Bank of India (RBI) notified the rules for them. As many as six companies have tried, but eventually declined, to issue these bonds, citing high costs.
"Masala bonds are yet to take off as they are extremely challenging. If the road ministry is successful at raising them, it could pave way for other infrastructure initiatives as well," said Jaijit Bhattacharya, partner at KPMG.