Easier contracts for highways

The National Highway Authority of India (NHAI) is considering ways to make road contracts more lucrative for private bidders.

The NHAI is now offering private companies operation maintenance and transfer (OM&T) contracts extending up to 10 years for developing longer stretches of roads.

Under the new system, the private party awarded the contract will maintain the stretches, collect the toll and give it to the authority over a period of time. Bidding on these contracts will be on the basis of the amount these companies promise to pay upfront.

"We want bigger players to come forward for operation and maintenance and under the new model, at least 500 km of stretches will be given out for a longer period of time than at present," an NHAI official said.

Till now, NHAI has given out seven OM&T contracts for 200-300 km of stretches for a period of 2-8 years.

With the Golden Quadrilateral project, connecting the four metros in the country, nearing completion, NHAI would have longer stretches available to be given under OM&T contracts by the end of the year, the official added.

The other option under consideration is to persuade the World Bank to provide guarantees for build-operate-transfer projects that will enable operators to take loans at concessional rates.

"The margin between the rates at which NHAI and private parties can borrow funds is in the 6-7 percentage points range. The guarantees given by the World Bank will reduce the difference considerably," a World Bank official said. The guarantees will be given against the risk of unforeseen changes in government policies.

The official said negotiations were on for projects under the yet-to-be undertaken third phase of the National Highway Development Programme.

Spinning track

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• NHAI considering operation, maintenance and transfer (OM&T) contracts under which private companies will get longer stretches of roads up to 10 years
• Companies can keep toll collections and pay an upfront money to NHAI
• Bidding on these contracts on the basis of upfront amount quoted
• At present, only O&M contracts are granted, which means that the private party awarded the contract maintain the stretches, collect the toll and give it to the authority over a period of time