NEW DELHI: The Life Insurance Corporation has come to the rescue of the Central government, which has decided to follow the path of fiscal prudence, to fund the government’s high-profile highway project — Bharatmala Pariyojana — with huge cost over-runs. LIC has agreed to dole out Rs 1.25 lakh crore by 2024 to fund the projects.
“LIC has offered us Rs 25,000 crore in a year and Rs 1.25 lakh crore in five years. They have agreed in principle. We will rope in these funds in highways construction,” said Minister of Road Transport and Highways Nitin Gadkari.
The Bharatmala project was approved initially at a cost of Rs 5.35 lakh crore. However, with a steep hike in land acquisition cost and other delays, the revised overall cost of the project went up to Rs 8.41 lakh crore.
LIC chairman R Kumar had called on Gadkari last week to discuss the matter. However, the development is not new. The finance ministry last year had mooted making use of LIC money to fund the projects.
As first reported by this publication on July 23, 2018, the ministry of road transport and highways has asked the government to increase the budgetary allocation, as a host of projects were facing cost over-runs.
However, with limited fiscal headroom, the finance ministry was not in agreement to increase the budgetary outlay and decided to stick to its targets.
As most of the projects were flagged as important ones, the finance ministry has finally suggested to invest in some of them with the help of the state-owned insurer.
“The decision was not immediate and was done after almost one year of negotiations between LIC, NHAI and the finance ministry. After getting a final go-ahead from the PMO, they have worked out on the amount,” a finance ministry official told TMS.
In the coming few days, the National Highways Authority of India (NHAI) and LIC officials will sit together and draw the modalities including finer details like interest rates, debt servicing and other details.
“The initial rate of interest was suggested to be 8-8.5 per cent, but later on it was decided that the rate would be revised after some period. However, the final rate will be decided in the next few days,” the official said.
According to a CARE Ratings report, the original cost of implementation of 1,304 infrastructure projects has gone up from Rs 16.2 lakh crore to Rs 18.38 lakh crore, a cost over-run of Rs 2.2 lakh crore.