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Infrastructure Investment Trust set by NHAI -Union Cabinet

Infrastructure Investment Trust set by NHAI -Union Cabinet

Union Cabinet authorises NHAI to set up Infrastructure Investment Trust

Union Cabinet authorises NHAI to set up Infrastructure Investment Trust
Union Cabinet authorises NHAI to set up Infrastructure Investment Trust

The Union Cabinet on Wednesday (11 December) approved the proposal of the Ministry of Road Transport and Highways authorising the National Highways Authority of India (NHAI) to set up Infrastructure Investment Trust.

The trust will enable the NHAI to monetise completed national highways with toll collection record of at least one year. “The NHAI reserves the right to levy toll on the identified highways,” an official said.

The cabinet approval has come at a time when NHAI is reeling under a debt of nearly Rs 2 lakh crore.

According to the Investment Information and Credit Rating Agency (Icra), a credit rating agency, NHAI’s total outstanding debt will increase to Rs 3.30 lakh crore by March 2022.

Infrastructure Investment Trust as an instrument provides greater flexibility to investors and is expected to create following opportunities-

  • InvITs are investment scheme similar to mutual funds that allow investment from individuals and institutional investors in infrastructure projects
  • Mutual funds and institutes like PFRDA can also invest in infrastructure space through InvITs
  • It would generate specialized Operation and Maintenance Concessionaires.
  • It would attract patient capital (for about 20-30 years) to Indian highway market, as these investors are unwilling towards construction risk and are interested in investment in assets which provide long-term stable returns.
  • Retail domestic savings and corpus of special institutions such as mutual funds, Pension Fund Regulatory and Development Authority (PFRDA), among others, will be invested in infrastructure sector through InvIT.

Background:

Roads and highways are the lifeline of the economy, connecting remote and far-flung areas and ensuring efficient transportation on regional as well as pan-India basis. Development of National Highways has a multiplier effect in terms of facilitating trade and enhancing the overall economic development of a region.

About NHAI :- 

NHAI’s InvIT will be a Trust established by NHAI under the Indian Trust Act, 1882 and Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations, 2014. The InvIT Trust will be formed with an objective of investment primarily in infrastructure projects (as defined by Ministry of Finance). InvIT may hold assets either directly or through an SPV or a holding.

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