Two West Bengal highway projects first to start on new BOT model

NHAI may consider floating another set of contracts in the next fiscal year

The Union government has launched a new contract for private participation in highway constructions by offering two stretches worth around Rs 4,214 crore in West Bengal on build operate and transfer (BOT) basis.

The two are for six-laning of Panagarh to Palsit (68 km) at a cost of Rs 2,021 crore and six-laning of Palsit to Dankuni (64 km) at a total project cost of Rs 2,193 crore. The bids were invited last week. The project award is expected to be in February.

When asked whether any more such bids will be invited in the current financial year, NHAI Chairman Sukhbir Singh Sandhu told Business Standard: “These two will be a test case for implementing the new BOT contract.”

Based on the response to these projects, the National Highways Authority of India (NHAI) might consider floating another set of contracts, but they would only be awarded in the next fiscal year.  This would be first time that NHAI would come out with the BOT projects after the new guidelines came into play. The share of BOT is usually around 10 per cent in the mix of project construction but for the past few years it was negligible as companies were not coming forward to execute those contracts.

In July, the new norms for national highway projects on BOT model were unveiled. To entice the private sector, certain sweeteners were added to the guidelines, which included monetary relaxations for the contractors in the absence of estimated traffic.

The traffic estimation will be done by the ministry of road transport and highways and NHAI.

The traffic projections would be certain periods of time — 5-year, 10-year, 15-year, and onwards. For instance, if the official estimates for a particular highway for five years is 20,000 passenger car units (PCUs) and the actual traffic on the road stretch after the 5-year period is 80 per cent of the estimated traffic, the highway developer would be compensated for the remaining 20 per cent traffic.

The new guidelines were finalised after several rounds of discussion between NITI Aayog, the road ministry and NHAI. Earlier this year, the NHAI came out with the new BOT guidelines or the draft Model Concession Agreement (MCA), essentially to bring back private players’ interest towards this mode of road construction.

The new norms have been brought in to encourage private participation in the BOT as big companies started shying away from these contracts because of various hurdles like clearances, contractual issues.

Large highway developers had exited the sector over delayed return on investment (ROI), rigid concessionaire agreements, and legal disputes with government.