The National Highways Authority of India (NHAI) is preparing to invite bids for 15 road projects in the fiscal year 2025. NHAI plans to offer Rs 44,000 crore road projects spanning 900 kilometers under the build-operate-transfer (BOT) model. In this model, private companies build and operate the roads and then transfer them back to the government after a set period.
This initiative could signal a revival of public-private partnership (PPP) projects in highway construction, involving government and private sector collaboration.
Government Amendments Boost Private Sector Interest in Road Projects
Earlier this year, the government significantly changed the model concession agreement to attract more private investment in road construction. These changes aim to make it more appealing for private companies to participate in infrastructure projects.
In the upcoming fiscal year 2025, the National Highways Authority of India (NHAI) plans to offer 15 road projects valued at Rs 44,000 crore under the build-operate-transfer (BOT) model. These projects will cover a total route length of 900 kilometers. Over the next three to five years, the government intends to offer 53 projects valued at over Rs 2.2 lakh crore. These projects will span approximately 5,200 kilometers under the BOT mode.
Following the amendments to the model concession agreement, there has been a notable increase in interest and participation in BOT projects. The Ministry is poised to capitalize on this momentum to drive nationwide infrastructure development.
Understanding the Build-Operate-Transfer (BOT) Mode in Highway Projects
The Build-Operate-Transfer (BOT) model allows the winning bidder to construct, operate, and maintain a highway project. They recover their investment by collecting tolls over a specified concession period. The BOT-toll model was popular until 2014 when higher revenue expectations drove aggressive bidding. However, after the new government took charge, delays in project execution and financial difficulties faced by developers and banks caused this model to decline.
Only one of the 176 projects awarded in the fiscal year 2023-24 was under the BOT mode. Most projects were awarded under the engineering procurement construction basis or the hybrid annuity model. No projects have been awarded in the current fiscal year due to the election model code of conduct, which was in place until recently.
Recent Changes in BOT Projects
Earlier this year, significant changes were made to BOT projects to improve their execution and viability:
- Construction Support and Extended Tolling Periods: The government now offers construction support to concessionaires to ensure projects are completed on time. Additionally, tolling periods have been extended to help offset losses due to competing roads.
- Clarity on Compensation: The amended model concession agreement clarifies the compensation the government will pay in case of force majeure events. It also outlines provisions for termination payments if a project is terminated during the construction phase after 40% completion.
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