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Exclusive: India set for $1bn national highways privatisation

The tender could be the first in a series of auctions as the Indian government seeks to recycle capital into new projects by selling state-owned toll road concessions.

India’s National Highway Authority could kick-start a process by the end of July that would see it auction off 10 state-owned road assets to institutional investors for about $1 billion. 

The privatisation is part of a bigger asset recycling programme through which the Indian government intends to monetise 75 selected national highways in the first phase of its effort to develop new projects in the country. India is looking to build more than 50,000km of additional roads in the next two years, according to the NHAI. 

The roads, which have been operational for over two years and are currently tolled by the authority, were selected for their “substantial traffic and considerable growth potential over a 30-year period of concession,” Rohit Singh, a NHAI member, told Infrastructure Investor, adding that traffic risks have been mitigated in its models to provide safeguards in the concession agreement. 

The NHAI is undertaking third-party surveys of all roads including traffic, origin-destination, road asset condition and structure studies. It is also getting aerial analysis of the roads using drones, Singh noted. 

He said that the survey results will be available to all participants in the auction, which it plans to roll out by the end of July. “Potential bidders will have 90 days to study the assets and submit their bids. All bids will be opened in a transparent process and on the basis of set technical and financial requirements.”

The NHAI has had discussions with various pensions and sovereign funds from Asia-Pacific, the Middle East and North America, Singh said, observing that he has seen “overwhelming interest in these assets from various institutional investors”. Foreign investors in India’s road sector include Macquarie, Abertis, PSP, CPPIB, Brookfield and I Squared. 

India’s road network spans 5.5 million km, carrying over 65 percent of freight and 80 percent of passenger traffic in the country. Of this, national highways account for 2 percent of the network but carry over 40 percent of the traffic. 

“We expect double-digit growth to continue in the road freight segment, as well as a doubling of the passenger car market by 2020. These, along with strong GDP growth and thrust on industrialisation in the country, will boost toll revenues on national highways,” said Singh.