NHAI delays third phase of road monetisation; to come with improved offer

The National Highways Authority of India (NHAI) has decided to rework the next road monetisation offering to entice bigger domestic investors.

It is learnt that the revamped Toll-Operate-Transfer (TOT) bundle will remove some road stretches, especially the lucrative ones, and will tweak the overall tenure of the project. 

The exercise may delay the tender of this bundle, which was expected to be out this month, said officials. The NHAI's decision to delay the tender comes within a fortnight of the Union cabinet giving it flexibility to fix the tenure of future road monetisation contracts. 

The current TOT projects have a fixed tenure of 30 years but after the cabinet decision, the same has been relaxed. NHAI has been authorised to fix the contract period from 15 to 30 years depending on the project.

“If the traffic is high and we feel that the investor can recover the cost earlier, we will keep a shorter tenure and likewise,” a NHAI official said.

On November 20, Cube Highways emerged as the highest bidder for the third bundle of the TOT projects offered by the NHAI by quoting Rs 5,011-crore fee. The same day, the cabinet approved amendments to the TOT model for national highways, allowing a flexible tenure as opposed to a fixed period of 30 years.

The first bundle of the monetisation programme gave NHAI Rs 9,682 crore.

The second bundle was cancelled last year after a lukewarm response ensured that the bids even failed to reach the base price. The bids for the third bundle were invited on June 13 this year and the last date for the submission of bids was September 11. Nine highway stretches totalling 566.27 km in Uttar Pradesh, Bihar, Jharkhand, and Tamil Nadu were on offer in the third bundle.

The government is banking on the TOT model for monetisation of completed road stretches. These contracts require private operators to manage and maintain roads while collecting toll on them. Since these are constructed projects, there is no construction or road acquisition risks involved in the contracts.

The first tranche of nine projects — totalling about 680 km roads in Andhra Pradesh and Gujarat — was awarded in 2018. Huge interest was shown by foreign investors. TOT Bundle-I was awarded to Macquarie for Rs 9,681 crore, which was 1.5 times the estimate.

The second bundle of over 586 km spread over four States — Rajasthan, Gujarat, West Bengal, and Bihar, with 12 toll plazas across four highways was also offered last year.

The TOT model in India has been developed to encourage private participation in the highways sector. It has the concessionaire paying a one-time fee upfront which then enables it to operate and toll the project stretch for the pre-determined 30 year concession period.

On August 3, 2016, the Cabinet authorised the NHAI to monetise public-funded national highway projects that are operational and are generating toll revenues for at least two years.

The transport sector had been allocated an enhanced outlay of Rs 83,000 crore in the Union Budget for development of roads and highways. The remaining funding requirement is to be met through direct investment by private companies or the monetisation programme.