Finance Ministry frets about NHAI not using bond funds
New-Delhi- The inability of the National Highways Authority of India (NHAI) to completely use the revenue generated through the tax-free bonds in the previous fiscal has created a lot of tension at the finance ministry as they have expressed their concern.
Due to the project awards being stuck, the agencies on the highways are compelled to keep Rs. 8,500 crore in fixed deposits.
According to an official, an issue pertaining the inability of NHAI has been raised by the finance ministry and this is similar to an arbitrage where the NHAI issued the bonds along with a coupon rate of 8.2-8.3 percent and has been generating higher interest rates as fixed deposit. It is believed that the NHAI has been earning an interest of about 9 percent from the money stored at the bank.
Apparently, the finance ministry is also trying to discontinue the tax free infrastructure bonds from the year 2013-2014. However, during the internal discussions of budget 2013-14, the issues of revenue loss through free bonds was raised.
Owing to these issues, the investor source for these instruments has dropped down due to the low coupon rates which are offered in the bond issue by the Rural Electrification Corporation and Power Finance Corporation.
As per the NHAI officials, when discussed about the fund in the banks they answered that they cannot use it due to the slowdown of the project award. They also said that some of the money which they generated last year was unused as most of the EPC projects could not be bid as there were regulatory hurdles. They have further discussed this issue with the finance ministry.
It was said that out of the money from NHAIs accounts, a sum of Rs. 7,500 crore was used to meet their land acquisition costs for the projects which were being awarded at the time of the fiscal. However, this could not happen as there was a slowdown in the awarding of the road projects.
In the year 2011-2012, the finance ministry had allowed NHAI to generate about Rs. 10,000 crore through the tax-free bonds. NHAI also has permission to generate another Rs. 10,000 crore for the present fiscal which will be revived next month.
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