NEW DELHI: To bring private investments back in the highway construction sector, the National Highways Authority of India (NHAI) has decided to award 937-km-long of stretches entailing investments of Rs 44,412 crore via the build operate transfer (BOT) model in the current financial year, a senior official said Friday.
The length of highways identified for BOT model of development is 15% of about 6,100 km of stretches that will be awarded this year by the NHAI. It also outpaces the target of increasing the contribution of BOT in highway construction to 10%. So far this year, just about 350-km-long highway stretches have been awarded via all models, including the fully government funded EPC.
These 937 km of highways are across 15 identified stretches of which nine are in Maharashtra, and one each in Uttar Pradesh, Assam, Jammu and Kashmir, Madhya Pradesh, Tamil Nadu and Telangana.
The reason for pushing BOT is that the company winning the concession builds and operates the highway thus saving resources of the government, the official said. However, there is a provision in some cases for capital grants of up to 40% in the BOT model also.
During 2007-2014, only BOT was used for building highways. With disputes, delays and over-ambitious toll projections coming unstuck, the model ran into problems, While the pace of highway construction slowed down considerably due to this, the government scaled up investments via the conventional EPC and later the hybrid annuity model (HAM) both of which don’t require the private players to put skin in the game.
In 2018-19 and 2019-20, no road concessions were awarded on the BOT model.
Apart from bringing in private sector resources in highway construction and reducing dependence on budgetary resources, the government also wants to push BoT due to quality issues in construction by other means.
Officials say that BoT will also improve the quality of construction of highways. In the EPC model the quality of construction is below par because the contractor’s job finishes on completion of the project while in BoT the concessionaire also has to operate the asset for 20-30 years so the quality of construction is much better, they say.
The government has been taking many steps to make BoT attractive by making changes in concession agreements and offering only viable projects with land already tied up for bidding, a senior government official said.
Only projects which are viable on their own or with viability gap funding will be offered for bidding. NHAI will also be committing 90% of the construction zone (land for executing) for such projects. In all the models of highway construction, land acquisition is done by NHAI.
Changes are being examined in Model Concession Agreement and Request for Proposal documents by the government to redraft some provisions for removing areas of dispute which led to investors fleeing away from this mode of highway construction.
Already flexibility has been given to concession holders allowing them to change ownership after a year instead of two years as was the rule earlier, and innovations like dispute resolution board and sharing of traffic risk have been provided to make BOT (Toll) more attractive. Removal of the requirement of capacity augmentation by the concessionaire also reduces the chances of disputes in the contracts.
Apart from the BOT (Toll) model where the earnings of the concessionaire is from toll collection, in the BOT (Annuity) model the government collects the toll but pays the annuity to the developer which helps it recover the costs.
Source: The Financial Express