In today’s Finshots, we take a look at NHAI’s new asset monetisation strategy and whether it can really fuel India’s highway ambitions.

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The Story

If you drive on a national highway in the coming months, there’s a good chance the toll you pay won’t go to the government. It might go to a Canadian pension fund. Or a sovereign fund in Singapore. Or even to you, if you choose to buy into a new public InvIT: a financial product that lets retail investors own a piece of India’s highways.

Because NHAI, the National Highways Authority of India, is on a mission. As per its newest asset monetisation strategy for the roads sector, it wants to raise thousands of crores without borrowing. It’s called MoRPH or the Monetisation of Public Highway Assets Framework. And under this, NHAI can auction tolling rights, bundle highways into investment vehicles and offer retail-friendly investment products to finance India’s road ambitions.

It sounds efficient. And necessary. But before we decide whether this is a silver bullet or a silver sell-off, let’s rewind a bit to know how NHAI got here.

In the early 2000s, NHAI didn’t really need to spend much money. It relied on the Build-Operate-Transfer (BOT) model, where private contractors built the roads, collected tolls to recover costs over 20–30 years and then handed the roads back to the government.

NHAI got its roads. Private players took the risk. Everyone was happy.

Until they weren’t.

Because by 2014, the BOT model had collapsed. Toll revenues didn’t match traffic projections, land acquisition dragged on, financiers got spooked and contractors walked away. In fact, BOT projects fell from 96% of all new road contracts in 2012 to zero by 2019.

So NHAI had to step in and build roads itself. And it switched to two new models.

1. EPC (Engineering, Procurement, Construction): NHAI pays the full construction cost up front.
2. HAM (Hybrid Annuity Model): NHAI pays 40% of the project cost during construction, and the rest over time as annuities, while the contractor manages part of the risk.

Now, these models were far more contractor-friendly and road building did take off.

India went from building 11.6 km of national highways per day in 2014 to 34 km per day in 2025. Roads became the backbone of India’s infrastructure story. A 2019 RBI study found that government capex on infrastructure had a 3.2x multiplier effect on GDP. It created jobs, boosted public services and laid the ground for industrial expansion.

But it also cost NHAI a fortune.

You see, highways need huge sums of money to build. And NHAI didn’t have deep pockets. So it began borrowing. Aggressively. Its debt jumped from ₹24,000 crores in 2015 to ₹3.35 lakh crores by 2024!

And here’s the thing. Even though NHAI is a government body, its debt doesn’t show up in the Centre’s official fiscal deficit. That’s because it’s classified as an autonomous entity. So technically, this is “off-budget” borrowing. But in reality, it’s still taxpayer money on the line. The CAG flagged this in 2019, saying that if you included NHAI and others like Food Corporation of India, the real fiscal deficit wasn’t 3.4% of GDP. It was closer to 5.8%. That set off alarm bells in some ways.

Because from 2022 onwards, the Finance Ministry stepped in and put a stop to NHAI’s borrowing spree. It said that the road ministry (MoRTH) would now directly fund NHAI from the budget. Which meant no more loans. If NHAI wanted to build more roads, it had to do it with funds allocated via the Union Budget. Or… find its own money.

And that’s where the monetisation strategy began.

Now, NHAI sits on a goldmine: a ₹3.5–4 lakh crore asset base of high-quality, toll-generating highways. So it thought: Why not lease out toll rights for 20 years in exchange for an upfront lump sum payment? That was the idea behind the TOT (Toll-Operate-Transfer) model, introduced in 2019. The investors, meanwhile, would recover their investment and profit through toll collections over years. And once the tenure ends, the roads are transferred back to the government. Thus, toll – operate – transfer.

Then came the InvIT (Infrastructure Investment Trust) model in 2021. NHAI bundled roads into trusts, sold “units” to foreign funds and financial institutions, and offered investors a share in toll income.

And it also rolled out securitisation through the SPV (Special Purpose Vehicle) model. Here, NHAI creates a separate legal entity (an SPV) for each road project, which then raises money by issuing bonds or borrowing from banks, using future toll revenues as collateral.

And now with the new strategy, this has been fully formalised. Every quarter will see 3 TOT bundles (small, medium and large), 2 InvIT tranches, and soon a public InvIT to bring in retail investors for the first time.

The goal here? It’s to raise ₹40,000 crores in FY26, by monetising 1,472 km of highways.

Because this monetisation strategy seems to be delivering. NHAI has already raked in over ₹1.4 lakh crores via TOT, InvITs and securitisation combined. And it’s using the proceeds well. It prepaid ₹56,000 crores worth of loans this year, saving ₹1,200 crores in interest. Its debt has dropped to ₹2.4 lakh crores by the end of FY25.

But all of this also raises a dilemma: are we monetising to unlock efficiency, or just to plug a funding gap?

Because here’s the thing. Monetisation is just a cash advance. It’s not income.

And there could be a few challenges the strategy could face.

For one, there’s a limit to what can be monetised. India has 1.46 lakh km of national highways. But most TOT or InvIT bundles need six-lane, high-traffic roads that generate solid toll revenues. And those are in short supply. The remaining roads? Either don’t have enough traffic or are tangled in legal knots. Not exactly attractive for long-term investors.

Then there’s the mathematics of monetisation. The 1,472 km of roads being monetised this year generated approximately ₹1,800 crores in toll revenue in FY24. But the government hopes to raise ₹40,000 crores in one go. That means investors will have to recover their money, and make a profit, from less than ₹2,000 crores in annual income over 20 years. Does that math really work? Maybe. But it’s not a given.

Also, when NHAI gives up 20 years of toll income today, it loses a consistent revenue stream that could’ve helped fund future construction in a more phased and planned manner. You’re swapping a pipeline of income for a one-time payout. That’s fine when you’re cash-strapped. But over time, you lose your revenue base. You’re essentially trading long-term income for short-term relief.

Take the InvIT structure for example. It lets NHAI hold a 15% stake while selling 85% to investors. But the big payday goes to private players. NHAI gets a one-time cheque and the private guys get cash flows for decades.

Meanwhile, the road-building ecosystem is changing. Infra giants like IRB and Adani, who once built these roads, are now bidding for the tolling rights too. They collect tolls, upgrade assets and even list them on their own InvITs. It’s a new loop with the public sector building the base, and the private sector reaping major rewards.

But what happens once all the best roads are monetised? Who funds the next wave of construction? Does NHAI then become irrelevant?

These are the questions the NHAI should be asking right now.

So yeah, the monetisation strategy is smart, clean and it’s helping reduce debt. It has brought huge private capital into an important sector. And in that way, it’s necessary.

But it’s not infinite. And it still counts as government expenditure, even if it’s not technically part of the fiscal deficit. The taxpayer is still footing the bill. Only this time, the payment is being made by selling assets instead of borrowing against them.

Eventually, India needs to ask what’s the long-term model to fund infrastructure? Should tolls go back to NHAI? Should a slice of fuel cess or GST be earmarked for highways? Or do we simply keep selling roads until the cupboard is bare?

Because once the monetisation runway ends, India will have to confront the real challenge of building a sustainable financing model that doesn’t lean heavily on budget allocations or asset fire sales. In 2025–26, NHAI’s budgetary allocation was raised to ₹1.87 lakh crores with no room for fresh borrowing for the fourth year in a row. And while monetisation has already fetched crores, that well isn’t bottomless. How we plan the next phase of road building, and who pays for it, will matter more than ever.

Until then…

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