Buyback clause in BoT projects

National Highways Authority of India (NHAI) proposes to introduce a new buyback clause for the build-operate and transfer (BoT) and annuity projects in the second phase of the National Highways Development Programme (NHDP).

The clause would allow NHAI to terminate the contract and take over the highway project "" for six or eight laning.

"The operator would be given the first option to upgrade the highways to six or eight lanes. But if the operator is unwilling to do so, NHAI would be able to buyback the contract before expiry of the concession period of 18 years," an NHAI official said.

The conditions would be built into the bid document, and the amount to be paid to the operators would take into account factors like net profits of the company and anticipated traffic density, the official said.

He added, India would be the only country to include such a clause in the bid document for road contracts. He, however, assured that termination of contracts would not be done arbitrarily and enough safeguards would be included, to ensure that only those stretches that genuinely need to be upgraded are taken over by the authority.

The official said that the authority in the past had faced difficulty in upgrading stretches under BoT contracts, as operators would ask for huge compensations in return.

He said that 18 years was a long period of time over which the traffic density could change radically.

The second phase of NHDP, which is to be completed by 2007, comprises four to six laning of the 7,300 kilometre North-South and East-West corridor from Srinagar to Kanyakumari and Silchar to Porbandar, at a cost of Rs 35,000 crore.

With all the contracts for the first phase or the Golden Quadilateral been given, the authority is expected to start with the second phase in the big way this year.

At present, in second phase, contracts for 15 per cent of the total length has been given and the balance 85 per cent are expected to be awarded by March 2005.

The official said that the delay in giving out contracts was because the authority was busy fine-tuning the detailed project reports and terms of concession agreement. This was to avoid problems faced during the first phase.