 "Gadkari shifts focus: InvITs prevail over TOT for highway monetisation")
The Ministry of Road Transport and Highways will be placing its investor-preferred toll-operate-transfer (TOT) model in the background in favour of the infrastructure investment trust (InvIT) route for monetisation, Union Minister of Highways Nitin Gadkari said on Wednesday.
“In the TOT model, the investors who took on projects promised us that they would bring their own investment, but our experience shows that they came here and took debt from Indian banks. I am also aware of the internal rate of return of some of these projects,” Gadkari said, while addressing a conference of the Highway Operators Association (India).
The model, alongside InvITs, has allowed several Indian and international investment funds to enter the infrastructure space by generating returns on operational roads.
“The TOT model is more favourable for the concessionaire than it is for the National Highways Authority of India, so we will be adopting the InvIT model more frequently,” the minister said.
Building BOT
Gadkari added that there will be a renewed focus on build-operate-transfer (BOT), where a private party takes the construction risk and recovers its investments through toll-collecting rights for a specified period.
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While a plan to bid out Rs2 trillion worth of such projects has been in the works for a while, the minister said that these will be tendered out in the coming months.
“We are preparing a list of BOT projects worth less than Rs1,000 crore each, which we plan to bid out before the model code of conduct (MCC, for the Lok Sabha elections) is implemented,” the minister said.
The move will result in two benefits — the small size of the projects will streamline the process of obtaining lengthy inter-ministerial clearances. Additionally, it will ensure that the pool of competition is large, as more players will be able to participate.
Sector participants, however, said that BOT projects, due to their financially sensitive and risk-prone nature, should typically only have participants with skin in the game.
The minister also mentioned that the Centre is seriously considering making stakeholders such as detailed project reports preparing engineers and road operators/project directors criminally liable for accidents occurring due to faulty roads.
Moreover, the Centre is also contemplating enforcing a defect liability period for highway contracts, under which a contractor or operator’s bank guarantee can be invoked if it fails to meet safety and qualitative requirements of national highways.
Deaths from road accidents reached a high of 168,000 in 2022, seeing a nearly 10 per cent rise, despite record investments in road infrastructure by the Centre and states, sparking criticism.