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Will propose separate finance arm for NHAI to finance ministry: Nitin Gadkari

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New Delhi: With funding from public sector banks drying up, the government plans to float a proposal to set up a dedicated finance arm for the National Highways Authority of India (NHAI), road transport and highways minister Nitin Gadkari said.

“The suggestion for making of a financial arm to NHAI is absolutely correct. I will take it to the finance ministry and will try to get approval for that,” Gadkari told the Rajya Sabha on Monday.

He had earlier referred to the Power Finance CorporationNSE 0.93 % and Railways Finance Corporation for power and railways, claiming that the road sector, which had been doing comparatively better, was facing a dearth of financing.

“Now there is this sector which is contributing 2.5% to the country’s GDP, (the) sector is moving fast, it is economically viable, the internal rate of return is good, but banks are not able to cooperate,” Gadkari said.

The highways ministry has no plans to abandon the hybrid-annuity model (HAM), which has been in operation for four years, even though banks have raised concerns over lending for such projects, he said.

Under HAM, the government provides 40% of the construction cost, while the rest is arranged by the developer. Land acquisition and toll collection are also government responsibilities. “The banking sector had raised concerns on account of stalled/languishing PPP projects,” Gadkari said, adding that his ministry has taken measures to address this.

Of the 123 projects sanctioned under HAM, the total cost involved was Rs 140,000 crore and the support received from banks was only Rs 47,000 crore, Gadkari said on Monday. “For around 121 projects, 90% of them have been sanctioned by private banks. But the problem is, our nationalised banks are not supporting that much as we are expecting from them,” he said.

Gadkari said that he wants to encourage the Indian Banks’ Association to lend to the infrastructure sector. “Banks are not even in a position to sanction bank guarantee. We want to encourage the Indian Banks’ Association. We will appoint a committee under the chairmanship of the secretary (ministry of road transport and highways) to find a solution for our Indian banks to be more friendly for development in infrastructure sector, particularly when the sector is moving fast.”

[“source=economictimes.indiatimes.”]