Pvt firms face roadblocks in BOT projects

Draft concession agreement for road projects under build, operate and transfer allows NHAI to terminate contract.

Private companies eyeing road projects offered on a build-operate-transfer (BOT) basis will now have to brace up for termination of concessions for no fault of theirs.

A draft model concession agreement for BOT road projects allows National highway Authority of India (NHAI) to take over projects before the concession period comes to an end for the purposes of capacity-augmentation and national security, or in public interest.

At present, BOT projects are not subject to this condition, while, in the case of under-annuity projects, NHAI can unilaterally terminate a contract for national security reasons or in public interest. Under annuity projects, traffic risk is borne by NHAI.

This can dampen private interests in road projects. But the government has tried to sweeten deals by proposing to bear the costs and risks of activities involved, like shifting utilities and cutting trees, if required, for building highways.

The draft states that the NHAI will be required to give at least six months' notice before exercising its right to take over. The authority in return will pay takeover prices that will equal termination fees paid to companies receiving concessions.

These companies will then be required to transfer the possession of their highway projects free of charge to NHAI.

The takeover payment will be credited to the Escrow account, which a company has to open once it takes over the construction of the project.

The draft has also said while those receiving concessions would be responsible for clearing the utilities and trees, the cost and risk of these activities would be borne by NHAI.

Difficulties in clearing stretches of obstacles was the major grouse of private companies, which have for long been complaining of delays on this account. Earlier, private companies had demanded stretches be given on a BOT basis only when necessary clearances were obtained by the government.

NHAI will extend all possible help, including obtaining of permits for felling or cutting trees and also exercising its rights under contracts entered with various utility owners.

Highway hungama

• NHAI to take over project before expiry of the concession period on grounds of capacity augmentation, national security or in public interest
• NHAI is required to give six months' notice before taking over
• The authority, in return, will pay a takeover price that equals the termination fee paid to the concessionaire
• The concessionaire will then be required to transfer the possession of the highway project free of charge to NHAI
• It will also need the replacement requirement of about 2.66 million GRT during the 10th plan period itself
• Productivity levels should be enhanced to 2 million compensated CGT annually against the current 0.15 million CGT