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Sunday, July 21, 2024

NHAI Aims to Boost Private Investment in Highways: Plans to Award Rs 44,412-cr BOT Projects this Fiscal

In a strategic move to reinvigorate private investments in highway construction, the National Highways Authority of India (NHAI) is set to award 937 kilometers of stretches, requiring investments amounting to Rs 44,412 crore, through the Build Operate Transfer (BOT) model in the current financial year. This initiative, representing 15% of the approximately 6,100 kilometers of stretches to be awarded this year, surpasses the target of achieving a 10% contribution from BOT in highway construction.

The identified stretches span 15 segments, with nine located in Maharashtra, and one each in Uttar Pradesh, Assam, Jammu and Kashmir, Madhya Pradesh, Tamil Nadu, and Telangana. The decision to emphasize BOT stems from the advantage it offers-the winning concessionaire assumes responsibility for both building and operating the highway, thus alleviating the burden on government resources. However, certain cases within the BOT model also allow for capital grants of up to 40%.

The move to prioritize BOT comes against the backdrop of challenges faced by the model between 2007 and 2014, marked by disputes, delays, and over-optimistic toll projections. This led to a slowdown in highway construction, prompting the government to increase investments through the Engineering, Procurement, and Construction (EPC) model and later the Hybrid Annuity Model (HAM), neither of which necessitated private players to invest their own capital.

Notably, no road concessions were awarded on the BOT model in 2018-19 and 2019-20. The government’s push for BOT aligns with its objective to bring in private sector resources for highway construction, reducing reliance on budgetary allocations. Additionally, it seeks to address quality concerns in construction, with officials asserting that BOT, with its longer operational commitment, ensures better construction quality compared to the EPC model.

NHAI is taking steps to enhance the attractiveness of BOT, such as offering only viable projects with pre-allocated land and committing 90% of the construction zone for such projects. The government is also examining changes in concession agreements and proposal documents to streamline provisions and mitigate areas of dispute that previously deterred investors. Flexibility has been introduced in concession holder rules, allowing ownership changes after one year, and innovations like dispute resolution boards aim to make BOT (Toll) more appealing. The removal of capacity augmentation requirements further reduces contractual disputes, reinforcing the government’s efforts to rejuvenate BOT as a preferred model in highway construction.

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