BOT highway projects set to take off after more than 2-year pause

Starting next month, government targets bidding out six projects by April 2022

After a gap of more than two years, the government is reviving the build-operate-transfer (BOT) model of getting private investment into highway construction. But with investment sentiment still tepid, the government will take only baby steps and is targeting to bid out six projects by April 2022.

The first project to go off the block would be of around 70 km, costing over Rs 1,700 crore, in Karnataka. The National Highways Authority of India (NHAI) is expected to invite bids for it later this month.

“We are starting with this contract in Karnataka and gauge the response, after that we will decide the future course of action for BOT projects,” said an official, who did not divulge further details about the project.

A senior road ministry official, however, said: “We want to start the bidding process for BOT projects and hope to award at least three this financial year and the same number next financial year.”

The Karnataka project would be the first BOT offering after the government brought in the new model concessionaire agreement in order to attract private investment.

The last BOT project – Hapur-Moradabad highway – was awarded in March 2018 to IRB Infrastructure Developers for approximately Rs 3,400 crore.

In February this year, NHAI came out with the new BOT guidelines to encourage private participation.

The reason behind bringing these changes was the exit of big-size companies in the sector over delayed returns on investment (ROI), rigid concession agreements, and legal disputes with the government.

The new norms have the harmonious exit clause to provide relief to projects that are stuck.

According to the new model concessionaire agreement, NHAI and the concessionaire would agree that in case of any financial default, the lender or banks can invite, negotiate, and procure offers, either by private negotiations or public auction or tenders for the take over and transfer of the project highway.

If the authority has any objection to the transfer of concession in favour of a nominated company in accordance with this agreement, it shall within 15 days from the date of proposal made by the lender representative, give a reasoned order after hearing the lender representative.

If no objection is raised by NHAI, it would be taken as accepted.

Besides the harmonious exit, the other major modifications are related to capping of liabilities of either party throughout the subsistence of agreement, tightening of conditions precedent prior to declaration of appointed date, and amendment in dispute resolution mechanism.

They also include changes incorporated from the recent updates in model agreements in other modes of implementation such as hybrid annuity mode (HAM), and engineering, procurement, and construction (EPC).