Govt to offer 10-20% of national highway projects on BOT basis for bidding

The government, confident of a revival in private investment, will offer 10-20 per cent of national highway projects this year on a build-operate-transfer (BOT) basis for bidding. 

Around 1,200 km of highway stretches have been identified for tendering under BOT, where private operators will invest and run the project during the contract period.

The government will include elements of the hybrid annuity and EPC (engineering, procurement, construction) models in BOT. This includes acquiring land for a project before it is awarded. 

It is learnt that the National Highways Authority of India (NHAI) has begun the process of awarding BOT contracts and the first such project will be tendered in a week.

“The government has done heavy lifting in the past couple of years with respect to investment and is re-igniting BOT as a prime way to channelise private capital,” said Jagannarayan Padmanabhan, director, CRISIL Infrastructure Advisory.

The 1,200-km projects that have been identified for tendering in this financial year include the ones that require viability gap funding (VGF). Projects of around 400 km require VGF and may be given priority because the government feels these will be lucrative for concessionaires, who will be assured the government is funding part of the project cost, another official said.

The focus on BOT means the project mix in highway construction will change from what it was in the past few years, when BOT formed 2-3 per cent of the mix. Now it is likely to be 10-20 per cent.

Experts say roads continue to be a focus area for the government and a healthy bidding calendar is expected in this year. 

Having achieved success in new public-private partnership models like HAM and ToT (toll-operate-transfer), the government is keen to kick-start BOT, which earlier had little takers.

“Projects with land acquisition will be given preference at the time of awarding them, which is the same as the case of HAM and EPC,” a senior government official told Business Standard.

Another important factor in determining the worthiness of a BOT project is the traffic volumes or the traffic projections on the stretches for a couple of decades. Potential stretches of high traffic are lucrative for developers.

“Stretches which have good traffic density potential and where significant percentage of land has been acquired will resonate well with the bidders.  We should start to see interest unfold in the BOT segment by 3Q of this FY,” Padmanabhan said.

Nearly 11,000 km of roads, 30 km a day, were constructed in 2018-19. The Ministry of Road Transport and Highways and the NHAI have plans to construct 45 km of roads per day in 2019-20.

The percentage of hybrid-annuity was more in the past couple of years or after the government introduced the model in 2015-16. It was brought in mainly to encourage private participation in the sector and was successful.