NHA turns into sick unit, loans exceed Rs 2.2 trillion
Aftab Ahmed
The National Highways Authority (NHA) turns into another sick unit and its loans have exceeded Rs 2.2 trillion.
The higher loans have made NHA a non-financially viable entity. Now, NHA is not in a position to pay out its loan installments.
The government had established Pakistan International Sukuk Company Limited (PISCL) and Pakistan Domestic Sukuk Company Limited (PDSCL). They operated under the company Act.
Finance Division had issued international Sukuk to raise $3.6 billion underlying the assets of NHA. It also issued domestic Sukuk of Rs 714 billion to raise funds for NHA.
The subcommittee on NHA held a meeting on August 24, 2020.Its analysis of the audited Financial Statements of NHA. It also discussed the current revenue stream, organization structure. It agreed that NHA is not in a position to payout its loan installments.
The NHA had undertaken unviable projects and rather selected for socio-economic benefits. It selected projects to ensure national integration through efficient, reliable, safe and environment-friendly national highways.
It laid work of motorway network for sustained economic growth and higher quality of life in Pakistan.
Moreover, NHA executed the projects in remote areas and had very less revenue generation potential to recoup the funds. NHA was not even able to reach the break-even point at any definite period of time.
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It also undertook various provincial projects from the PSDP releases (CDL) which were later on handed over to the Provincial Governments.
However, PSDP releases for these projects are still reflecting in the books of NHA as Cash Development Loans along with accrued interest. They created a huge negative impact on NHA’s financial health.
Recommendations to bailout NHA
Ministry of Communications had requested the ECC to consider recommendations and committee members unanimously agreed.
It recommended capitalizing outstanding mark-up accrued to date on all CDL/FRL on NHA as of June 30, 2020.
The ministry further said that there would be a moratorium on further accrual of mark-up on the capitalized CDL/FRL. There will be a grace period of five years on the recovery of the loan. The creditors will recover loans in 25 years in equal annual instalments.
During this grace period, moreover, NHA shall restructure and develop a comprehensive long-term business plan.
It will enhance revenues from its existing streams as a result of augmenting revenues from ancillary businesses. NHA will turn into a corporate entity in due course of time.
In the future, the government will treat all PSDP-funded NHA projects as CDL (or FRL) on existing terms. However, NHA will undertake to fund projects on the directives of the Government of Pakistan. The Finance Ministry shall treat as a grant to the extent of the viability gap of the project.
The government will treat the existing PSDP portfolio under similar treatment. However, the government has not approved these recommendations so far.
