The finance ministry has expressed concerns over the inability of the National Highways Authority of India (NHAI) to fully utilise the money raised through tax-free bonds in the last fiscal, according to a report.
With project awards stuck due to poor response from investors, the highways agency has been forced to park about Rs8,500 crore of such funds in fixed deposits, says The Indian Express.
''The finance ministry has raised the issue. It is almost like arbitrage where the NHAI issued the bonds with a coupon rate of 8.2 to 8.3 per cent, but is earning higher interest in fixed deposits,'' a person close to the development told the paper. The NHAI is understood to be earning about 9 per cent interest on the money it has parked with banks, says the report.
Significantly, the finance ministry is also looking at discontinuing with such tax-free infrastructure bonds from 2013-14. The issue of revenue loss through such bonds has been raised during internal discussions on the budget for 2013-14.
Adding to the problem, investor appetite for these instruments has also significantly declined due to low coupon rates offered in the bond issue by Rural Electrification Corporation and Power Finance Corporation.