Global Economy

NHAI in talks to make BOT projects attractive

New Delhi: The National Highways Authority of India (NHAI) is looking to tweak the build-operate-transfer (BOT) framework of highways development as the government plans to revive the model which has failed to elicit interest from the private sector.

The authority has initiated consultations with the industry on the kind of changes that can be carried out in the framework.

NHAI has identified projects with high traffic density which can be offered on BOT. “NHAI chairman had called all BOT concessionaires, and has taken their views,” a government official told ET, asking not to be named.

“There are certain issues they want (addressed), and certain changes are being deliberated upon.” Apart from this, concessionaires want certain changes in the Termination Payment clause, the official said. “They want certain mechanism to address fluctuation in traffic, because there are so many new developments, new road stretches that come up,” the official added.

Some of the major challenges facing BOT projects are timely land acquisition and forecasting traffic density correctly. Developers have in the past bid irrationally, after which they were not able to get financial closure and the projects were stuck in the operational stage.

In the past, the operating risks were left completely on the private sector and there has almost always been a mismatch in the assessment of total project cost between NHAI and the developers, said Vinayak Chatterjee, chairman at Feedback Infra.


The model concession agreement requires complete overhaul of various issues in the operating and construction risks basket, Chatterjee said. “In termination of both debt and equity, the clauses have been disproportionately weighted against the private sector. In case the project is terminated for certain reasons, it requires significant allocation of risks between the public and private sector,” he added.

The official quoted above said some development is expected on this front over the next couple of weeks.

Nitin Gadkari, who took charge of the ministry of road transport and highways last week, said his ministry is identifying means to revive BOT.

“We have identified 3,000 km with traffic density of 17,000 pcu (passenger car unit). I have suggested that this should be offered under the BOT mode,” Gadkari told ET in an interview on June 6.


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