NHAI financial squeeze, and government’s capex window-dressing

The NHAI, the best asset monetisation governmental organisation until 2023-2024, is gradually walking away from asset monetisation

Patting itself for constructing 5,614 kilometres of national highways (NH) in 2024-2025, the Government of India claimed that the capital expenditure (capex) by the NHAI for development of NH infrastructure ‘reached an all-time high of over Rs 2,50,000 crore (provisional) against a target expenditure of Rs 2,40,000 crore’, which was the ‘highest ever capital expenditure in a Financial Year by NHAI’.

The NHAI’s own accounts (unaudited) for 2024-2025, however, report capex (addition to completed and in-progress roads) of only Rs 1,45,748 crore during the year: more than Rs 1 lakh-crore less than the government claim!

Why is there such a big difference in the claim? Is it a false claim? Is the government putting a financing squeeze on the NHAI, while doing capex window-dressing?

False claim

The NHAI annual reports for 2023-2024 and 2024-2025 are yet to be published.

Published Accounts for 2022-2023 inform the NHAI’s outstanding debt on March 31, 2023, at Rs 3,43,114 crore, comprising Rs 2,04,978 crore of secured debt and Rs 1,38,136 crore of unsecured loans. The unsecured loans included Rs 80,136 crore, largely from public sector banks (SBI Rs 36,286 crore, Bank of Baroda Rs 14,500 crore, and Canara Bank Rs 13,500 crore) and a Rs 50,000 crore loan taken from the government’s own National Small Savings Fund (NSSF).

As per the unaudited results, the outstanding loans at the end of 2023-2024 remained almost unchanged at Rs 3,35,373 (unsecured Rs 1,36,442 crore). However, the outstanding loans at the end of 2024-2025 (Rs 2,44,604 crore) witnessed a drastic reduction, mostly in unsecured loans by Rs 86,187 crore to Rs 50,255 crore.

Interestingly, as recorded in Budget 2025-26RE, Rs 50,000 crore of the NSSF loan was repaid by the NHAI, which effectively went back to the government. The rest of the unsecured loan repayments must be on account of repayment of public sector bank loans.

Read together, the Government of India provided capex, support of Rs 2,50,000 crore to the NHAI and received repayment of Rs 50,000 crore through the NSSF, making a net contribution of Rs 2,00,000 crore and not Rs 2,50,000 crore as claimed. Further, as a part of the capex, support was used for repaying banks, the actual NHAI capex amounted to Rs 1,45,748 crore as correctly reported in the NHAI’s unaudited accounts.

Without doubt, the claim of the NHAI spending Rs 2,50,000 crore, on road construction, is false!

Monetisation is weakening

In a March 26 press release, the PIB claimed that the National Highways Infra Trust (NHIT), the InvIT set up by the NHAI in 2020, to support India's monetisation programme, ‘successfully concluded fourth round of fund-raising at an Enterprise Value of about Rs 18,380 crore, making it the largest monetization transaction in the history of Indian roads sector’.

The NHAI undertakes three kinds of monetisation transactions.

First, Toll, Operate and Transfer (ToT), where it receives an upfront one-time payment for transferring tolling rights of the constructed road assets to private operators for a specified period (usually 20 years). This has been the best monetisation vehicle. Initiated in 2018-2019, the NHAI made excellent use of the ToT model in 2022-2023 (three transactions involving 314 kilometre roads for Rs 10,662 crore) and in 2023-2024 (four transactions of 697 kilometre roads for Rs. 15,968 crore).

In 2024-2025, however, the NHAI could do only one transaction (252 kilometres for Rs 6,661 crore). In 2025-2026, the NHAI has not been able to carry out a single transaction so far. Road minister Nitin Gadkari has also recently rued that the Union government has decided to discontinue the ToT model.

Second, is the NHIT InvIT model, which the NHAI has been using for the last four years. A total of 2,345 kilometres of roads have been transferred to the NHIT for a total ‘monetisation value’ of Rs 43,648 crore.

The NHAI NHIT InvIT model is, to a large extent, a sham. Road assets continue to be managed by the NHAI through a 100% owned project company, without any private sector involvement. The investment manager, which manages the NHIT investments, is 100% owned by the government. The NHIT borrows a good part of the investment required from banks and other financial institutions, to nominally replace the NHAI’s borrowing. There is only limited financial monetisation, to the extent that the NHIT units are purchased by private investors, which accounts for approximately 50% of the total monetisation value.

The last model, project financing of new roads through a government-guaranteed special purpose vehicle (SPV), is not a monetisation model at all. The Delhi-Vadodara expressway, currently under construction and experiencing substantial delays, is the only one being undertaken through this route.

The NHAI, the best asset monetisation GoI organisation until 2023-2024, is gradually walking away from asset monetisation.

Government freeze

The Bharatmala project, sanctioned in 2017-2018 for constructing 34,800 kilometres of roads at a project cost of Rs 6.92 lakh-crore faced enormous cost and time overruns, besides land acquisition and contract execution issues. Quite curiously, the government put the project on hold for review before the 2024 elections.

The review is yet to be completed. Consequently, the Bharatmala project remains stalled. No alternative project has been approved. As the actual NHAI capex slows down, the government repays loans and falsely claims higher capex.

The NHAI construction, the most productive of the Government of India’s capital expenditure investment story, is in for a difficult life ahead.

(Subhash Chandra Garg is former Finance & Economic Affairs Secretary, and author of ‘The Ten Trillion Dream Dented’, ‘Commentary on Budget 2025-2026’, and ‘We Also Make Policy’.)

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.