NHAI Proposes Overhaul of BOT Model to Spur Private Investment in Highways
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The National Highways Authority of India (NHAI) is set to revamp its Build Operate Transfer (BOT) model, seeking major changes in termination clauses and road traffic density to attract private developers. The proposed reforms aim to address challenges in the BOT projects, offering more flexibility and reducing risks for both private developers and financial institutions.
Estimated at Rs 45 trillion for long-term highway infrastructure, the NHAI’s initiative aligns with the government’s push for comprehensive reforms to accelerate project execution and boost investor interest.
The proposed modifications include provisions for termination payments, adjustments in concession periods based on actual traffic conditions, and compensation for developers impacted by changes in laws. NHAI’s move towards a “zero arbitration” goal aims to streamline the termination process, providing clarity on debt repayment in case of project termination during construction or due to legal proceedings.
The revamped BOT model seeks to empower concessionaires by offering additional revenue incentives if traffic density exceeds the projected figures. Developers will also gain leeway in handling changes in laws or other factors affecting traffic. These changes aim to create a more attractive environment for private players, encouraging their active participation in national highway projects.
NHAI Chairman SK Yadav revealed that only seven out of 706 national highway projects have been bid out under the current BOT model. The proposed reforms, currently at the inter-ministerial consultation stage, could significantly improve the appeal of BOT projects for private entities, leading to increased project bids.
Union Minister Nitin Gadkari emphasized that addressing bottlenecks in the highway sector is essential, as it often results in contractors’ wipeout, discouraging competitive bidding. The proposed rules also address the impact of competing roads on toll revenues, allowing the authority to buy back the highway from the contractor if a rival road is being constructed.
While the NHAI’s proposed changes bring a positive outlook for private investment in highways, uncertainties remain. Clarity is needed on whether these provisions will apply prospectively or retrospectively to existing concession agreements.
Additionally, the evolving infrastructure landscape, including competing roads and other modes of transportation, necessitates a holistic long-term planning approach to ensure the sustainability of the revamped BOT model. The success of these proposed reforms is crucial for the government to achieve its highway contract awarding target for FY24.
