Union Cabinet authorises NHAI to set up Infrastructure Investment Trust

December 12, 2019

Union Cabinet approved the proposal of Union Ministry of Road Transport and Highways (MoRTH), which authorizes National Highways Authority of India(NHAI) to set up Infrastructure Investment Trust(s) (InvIT) as per InvIT Guidelines issued by Securities and Exchange Board of India (SEBI). This will enable NHAI to monetize completed National Highways that have a toll collection track record of atleast 1 year and the NHAI reserves the right to levy toll on identified highway.

Implementation

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

Significance

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

It would generate specialized Operation and Maintenance (O&M) 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, therefore, development of National Highways has a multiplier effect in terms of facilitating trade and enhancing overall economic development of a region. In October 2017, Union Government launched its flagship highway development programme called Bharatmala Pariyojana, for development of 24,800 km of roads for a total investment of Rs. 5,35,000 crore.

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