Govt chalks out plans to overcome challenges in road-monetisation projects

To keep investors interested in road-monetisation projects, the Union government has chalked out plans to overcome some of its challenges that might deter favourable bids.

A major challenge for the road ministry and the National Highways Authority of India (NHAI), trying to put more stretches of highways under the toll-operate-transfer (TOT) scheme, is that some require upgrades in the next 10 years. A TOT contract is usually for 25-30 years.  A call needs to be taken on whether projects will be completed before they are tendered out. “But, if we wait for the upgrade before the projects are bid out, we will lose a lot of time,” an official said.

Another plan being considered is leaving these stretches out and tendering the remaining portions of the roads. 

“There is a demand for this,” an industry expert said, adding that there was a lot of appetite in the market for monetisation projects. The road projects also have some inherent challenges, according to industry experts. 

“The Bharatmala or the rail-freight corridors could significantly change traffic patterns in the country,” said Vinayak Chatterjee, chairman, Feedback Infrastructure.

Another reason is future capital expenditure. “The roads need to be widened when traffic increases. This requires capital expenditure, which has to be predicted now,” Chatterjee said.

Another challenge is convincing investors to bid for TOT projects when the technology for toll collection is changing. 

Some experts argue over the need for building and maintaining toll plazas at a time when the RFID (radio-frequency identification technology)-based tags have been introduced. This allows cashless movement on the highways. By using tags, a driver can zip through toll gates without any human interface, saving time.

“With the technology changing everyday, which concessionaire would want to park its funds for 25 or 30 years in a contract that includes toll collection and maintenance of plazas,” an official, who did not wish to be named, said.

Even as the road ministry and the NHAI continue to grapple with these issues, the larger question is whether or not the central government should rely on such an exercise to raise funds for infrastructure projects or should it look at bigger ticket sizes. 

The NHAI recently got green light for a ~250-billion loan from the State Bank of India as part of its fund-raising exercise for the current fiscal year. It has also filed for medium-term loans ~250 billion in the international market.