Government today approved a proposal to monetize public-funded national highway projects, a move that can garner about Rs 1 lakh crore.
"The Cabinet Committee on Economic Affairs has authorised National Highways Authority of India to monetize the public funded highway projects which could result in funds in the range of Rs 80,000 to Rs 1 lakh crore initially," Road Transport and Highways Minister Nitin Gadkari told PTI.
Around 75 operational NH projects completed under public funding have been preliminarily identified for potential monetization using the toll operate transfer (TOT) Model, the Minister said.
The Minister said the corpus generated from proceeds of such project monetization could be utilised by the government to meet its fund requirements regarding future development and operation and maintenance of highways in the country and could address development/strengthening of highways in unviable geographies.
Meanwhile as per the statement from Road Transport and Highways Ministry, NHAI has been given approval for monetizing public funded National Highway (NH) projects which are operational and are generating toll revenues for at least two years after the Commercial Operations Date (COD) through the TOT Model.
The monetization will be subject to approval of the Competent Authority in Ministry of Road Transport and Highways (MoRTH) / NHAI on a case to case basis, the statement said.
This Model would provide an efficient Operation and Maintenance (O&M) framework requiring reduced involvement of NHAI in projects post construction completion.
The Model would facilitate efficient toll realization through private sector, the statement said and added it would also create new business opportunities a new vertical of developers who specialize in O&M of highways besides institutional investors including Pension & Insurance Funds, Sovereign Funds, etc which are averse to taking construction risks but are adequately equipped for making long term investments in road infrastructure.
"This approval would ensure better O&M of public funded NH stretches resulting in enhanced quality of service for highway users across the country," the statement said.
For the traditional public funded NH projects i.E. projects constructed under erstwhile Item Rate Contracts or the current Engineering, Procurement, Construction (EPC) lump -sum contracts, after completion of construction and completion of defects liability period of up to four years, the contractors exit the projects and the entire responsibility maintenance and operations including toll collection comes on to NHAI.
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NHAI generally outsources such services through various vendors and contractors.
The government said with continuous growth of the sector, number of public funded operational highway projects is likely to increase over time.
"Such completed and operational public funded projects in some cases have been bid out under the Operate, Maintain and Transfer (OMT) contracts wherein the selected concessionaire is required to take care of the project O&M for a period of around 6-9 years depending on when the major periodic maintenance is due. The OMT model has only been partially successful," it said.
Limitations of the model include relatively short tenure of O&M obligations for the concessionaire and participation mostly being restricted to contractors and developers only, the statement said.
It said monetization of public funded NH roads is expected to create a framework for attracting long term institutional investment on the strength of future toll receivables.
Market feedback indicates that certain institutional investors from outside the country have a long term investment appetite and are keen to participate in operational highway projects with stable toll revenue outlook, it said.
These investors generally hesitate from taking construction risk but are willing to look at de-risked Brownfield road assets, it added.
