The government is contemplating a significant reduction or elimination of a substantial portion of the National Highway Authority of India’s (NHAI’s) Rs3.4 trillion debt within the next five years, redirecting resources towards bolstering highway infrastructure, according to sources familiar with the matter.
Part of the road and highways ministry’s 100-day agenda, the debt retirement plan aims to trim high-interest long-term debt and reduce interest payments, said one source, speaking on condition of anonymity.
Efforts are underway to negotiate with NHAI’s long-term bondholders for prepayment, noted another source, also requesting anonymity, highlighting that the agency’s interest payments are consuming a sizable portion of the government’s annual budget allocations.
NHAI has issued fixed coupon rate bonds with varying tenures, several of which are maturing between 2025 and 2030. The strategy involves retiring these bonds initially, followed by considering early exits for long-term bondholders with maturity extending up to 2040.
Spokespersons from the finance and road ministries, as well as NHAI, did not respond to queries.
NHAI’s borrowing activities have been suspended since FY23, necessitating meeting the agency’s entire capital requirements through central budget allocations. However, during FY23, NHAI borrowed a small amount through 54EC bonds.
Despite the suspension of large borrowings, NHAI’s debt levels have not significantly decreased in FY24. Nonetheless, the agency aims to substantially reduce its debt in the coming years through various measures, such as prepaying old debt, swapping high-cost debt with lower interest-bearing loans, and utilizing InvITs.
The goal is to reduce NHAI’s debt by ₹50,000 crore to ₹75,000 crore annually over the next five years, with the aim of transforming the agency into a zero-debt entity by FY42.
The Union budget for FY25 allocated a record Rs1.68 trillion for NHAI’s road, highway, and bridge construction, slightly higher than the revised estimates for FY24.
NHAI’s debt servicing costs are estimated to exceed Rs30,000 crore in FY24, reaching over Rs62,000 crore by FY28.
NHAI’s debt has surged from Rs24,188 crore in FY15 to Rs3.48 trillion as of September 2023. Although the agency borrowed around Rs65,000 crore and Rs76,000 crore in FY21 and FY22 respectively, it has ceased fresh borrowings since then. However, NHAI continues to finance highway projects through project-based financing under the special purpose vehicle (SPV) route.