Plan panel for road projects on BOT basis

The system of a private company or a private developer receiving fixed payments (annuity) for constructing a road project may soon be a thing of the past.

Going by what the Planning Commission has communicated to the department of road transport and highways, all road projects may come to be awarded on a built-operate-transfer basis.

"The transport ministry should give built-operate-transfer projects rather than introducing annuity-based projects," a government official told Business Standard.

The Planning Commission has also criticised the road department for preparing a new policy framework for annuity-based projects. The panel is of the view that this will discourage private parties from opting for the build-operate-transfer route.

The objection was raised at a meeting held to review implementation of decisions taken by Prime Minister Manmohan Singh's Committee on infrastructure.

The rationale offered by the Plan panel is that annuity-based projects would adversely affect market sentiments in bringing private builders onto the BOT route.

"A policy document for annuity-based projects, which is being framed, is not the right way of constructing roads through private partnership," the official added.

The Plan panel is of the view that in BOT projects there is an in-built mechanism to ensure quality of roads as the builder has to maintain roads for a specific time period and any variation in quality will affect its own maintenance cost.

"BOT projects are a good option as even the Cabinet has agreed that 40 per cent restriction on viability gap funding can be extended further depending on the response of the private companies," the official said.

The Planning Commission officials also pointed out at the meeting that the market response to BOT projects had been encouraging and the National Highways Authority of India should work towards further promoting BOT projects rather than evolving a mechanism for annuity-based projects.