National Investment and Infrastructure Fund
NIIF has signed a deal with NHAI to fund large road projects. Credit: Hayden Walker on Unsplash.

The National Investment and Infrastructure Fund (NIIF) has signed an agreement with the National Highways Authority of India (NHAI) for financing large road projects.

Under the agreement, NIIF and the NHAI will form a special purpose vehicle (SPV) to execute fund arrangements for significant road projects. Projects will be undertaken by the NHAI.

NHAI has been seeking to offer equity to investors in highway projects.

NIIF plans to invest equity of around Rs150bn ($2.18bn) in the Delhi-Mumbai expressway, while raising debt of around Rs600bn ($8.74bn) on the equity, reported The Economic Times.

The MoU may go to the cabinet for approval to finalise details on toll distribution.

This move comes as the Highways Ministry is exploring new ways of funding. India’s infrastructure targets are much more than the government is currently spending.

The SPV will enable NIIF to receive sovereign funds so that the organisation can also invest in projects being constructed by NHAI.

Under the SPV, NHAI will be responsible for all construction risks, and land acquisition costs.

India Road Transport and Highways Minister Nitin Gadkari said: “NHAI has the appetite to take the maximum funding that NIIF has to invest, given the size of the projects that we have undertaken. This arrangement will help in meeting the fund requirements under Bharatmala.”

NIIF will also look at projects offered by NHAI on toll-operate-transfer (TOT) basis.

NIIF managing director Sujay Bose was quoted by The Economic Times as saying: “One of the first projects we reviewed was TOT-I, we will continue to bid for TOT. NIIF is quite keen on investing in the projects from NHAI.”

Through the TOT model, investors will be able to make a one-time lump sum payment in exchange for long-term toll collection rights.