Centre plans to hold franchise auctions for expressways

The highway ministry is planning to auction capital-intensive expressways to franchises after they are built. The least present value of revenue (LPVR) auction, consultations for which are under way with stakeholders, is likely to be put up for Cabinet approval.

LPVR auctions are adopted worldwide for expressway franchises. The franchise is won by the firm bidding the least present value of toll revenue. The project returns to the government after the contract expires. The new mechanism allows the contract to lengthen if traffic grows slower than expected and shortens it if traffic growth is faster than anticipated. Expressways likely to be executed in LPVR mode will be built on engineering, procurement and construction contracts through government funding. Once construction is over, private franchisees will run the projects. The government will ensure there is no leakage in toll collection by enabling electronic toll booths.

Investors’ sole concern would be leakage in toll collection, the primary source of income for project developers, an official told Business Standard. “At present, we are not looking at build, operate and transfer or hybrid annuity model contracts in LPVR,” the official added. Projects shortlisted by the ministry are the Delhi-Amritsar-Katra, Vadodara-Mumbai, Chnnai-Bengaluru, Kanpur- Lucknow highways. Also included are highways connecting Ahmedabad with Dholera, the proposed smart industrial city in Gujarat. The official said these contracts were shortlisted keeping in mind traffic projections. Recovery on these stretches may take more than 30 years.

 

Maintenance of expressways through franchises was the way forward, an expert said, adding the cost of maintenance would come from toll collection. Operational EPC projects are being contracted out for toll collection and maintenance under a monetisation plan of the government. 

These projects are being offered to the National Infrastructure Investment Fund.