Ahead of Prime Minister Narendra Modi’s discussions with investors and bankers later this month, the Ministry of Road Transport and Highways (MoRTH) has called a meeting of top bankers for mulling ways to step up lending in infrastructure projects. Minister for Road Transport and Highways Nitin Gadkari is expected to push bankers to come forward with loans at low interest rates to fund infra-projects.
The move is clearly aimed at reviving the interest of Indian lenders in road and highway projects, which have fallen out of favour with banks and financial institutions over the last couple of years.
The highways sector has been languishing for want of funds for the last few years. The investors have pulled out in big number after several projects failed to take off because of delays in mandatory environmental clearances and land acquisition issues, resulting in major losses to the entire industry.
“Most banks are afraid of parking money in the infrastructure sector, owing to bad returns over the last few years. They are maintaining that they will stop short of exceeding their exposure to infrastructure sector to 8-10 per cent. They are very guarded in their lending pattern,” said an official from MoRTH.Currently, public sector banks have more than 65 per cent exposure to the overall loans provided to the highways sector.
“The Minister has invited both State-run and private banks to the meeting to increase access to finance for infrastructure projects and also bring down interest rates to about four per cent,” said the official.Even at the launch of the electronic toll collection system on the Mumbai-Delhi corridor earlier this week, Gadkari urged Indian bankers to come forward with loans at low interests for infrastructure projects.
“Although foreign investors are showing interest in funding road and highway projects, I still want Indian banks to come forward with loans,” said Gadkari.Even since the Government has started looking overseas for investors, Japan has offered to help construct roads in the North-East, and Malaysia has also come forward to fund road building projects in Rajasthan.
“Since the Government has decided to convert a majority of its projects from build-operate-transfer mode to engineering, procurement and construction (EPC) mode to ramp up the pace of construction, where the risk onus is on the Government, I don’t think the bankers have much to fear,” said an official from the Ministry.
Even in the past, Gadkari has insisted that in the next two years, the growth trajectory in the highways and shipping sectors alone will add at least 2 per cent to the country’s GDP.Of the total target to award 8,500 km of national highways during 2014-15, about 2,300 km are to be awarded through the EPC route. The total cost of these projects is over Rs 20,000 crore.